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2016 London Housing Market Outlook

January 27, 2016

Will property prices rise or fall? Should landlords sell up? Where are the new investment hotspots?

Mark Lawrinson, Regional Director of Portico and resident property expert, discusses Portico’s outlook for 2016.

If you’re thinking of selling, sell now

The market is no longer as seasonal or predictable as it used to be. We could always predict a second bounce in the market in September (post the lull in August), but now that is just not the case.

Last year we saw a very busy start to the year, followed by a gradual slow down as the year progressed, with no second bounce. This year, January has had a strong start, and this is likely to continue into February. As the market is currently unpredictable, if you’re thinking of selling, there’s no reason to wait, not least because prices are at an all time high. In addition, given that instruction to completion is currently a 5 month process, if you want to sell by summer or be in a new home by the time we hit warmer months, now is the time to act and get a property valuation.

Low interest rates make buying property attractive

Mark Carney has recently given the biggest hint yet that he isn’t prepared to move rates anytime soon. With everything that is happening in China, and the greater concern over the volatile markets, moving interest rates is still too big a risk. Even though property prices are high, with interest rates remaining at an all-time low, buying a house is still usually cheaper than renting and definitely more attractive.

The main price increases will be seen in Zones 3 & outwards

Our view is that the main increases will be in Zones 3 and outwards, with little or no growth in Prime Central London (have a look at our video which explains why we think this will be).  Volumes of transactions are likely to decrease by 10-15% across London though, potentially further widening the gap between supply and demand and hence having the knock on effect to prices rising.

A rush to invest in buy-to-let property

We have already seen a surge of investors purchasing buy-to-lets before the tax changes will be implemented in April.

We have just heard announcements however that banks are preparing to reduce the deposit required for a buy-to-let mortgage from 25% to 20%, so this in itself covers the 3% proposed increase on stamp duty tax for second homes.  We are yet to see the rates associated with an 80% loan to value for buy-to-let, but as competition from banks increases on this level of lending, they are likely to be attractive. 

It’s likely therefore that some landlords may simply cover the extra costs through rent increases.  We wouldn’t be surprised to see rents increase by 3 - 4% as an average across London this year. 

Where are the new investment hotspots?

Acton is still in the spotlight, with Crossrail, Proposed HS2 and the regeneration of the high street and local estates making it more and more attractive. It has grown significantly in recent years, but we still expect it to grow in popularity. Highbury and its surrounding areas is also becoming a hotspot, as people are no longer limiting their search to just N1.  With Stoke Newington easily accessible to the City, and the emergence of a string of trendy bars and clubs, it’s a great spot for young professionals to rent or buy.  

We have created an innovative rental yield map which can find the best rental yields in London in a couple of clicks. If you're unsure where to get the best return on your investment, check it out!

 

If you’d like an expert property valuation, or if you’d like more information on what has been discussed, give us a call on 0207 099 4000.


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