In recent months, the London property market has seen a lot of growth. With the general election results in December 2019 providing more political certainty, the market built up momentum and saw a rise in property prices in what has been coined the “Boris bounce”.
The property market in London actually experienced the strongest start to a year since before the Brexit referendum. The average asking price in the capital increased to £638,826, which is a 5.1 per cent annual rise and 1.6 per cent growth from February, according to Rightmove’s House Price Index for March 2020.
Rightmove’s monthly index also revealed that the number of sales agreed in the capital increased by 34.4 per cent, the highest level for four years. Across the UK it was a similar story, with the number of sales agreed rising by 17.8% - the highest for that time of year since 2016. Properties also sold an average of 6% faster nationally and 15 days more quickly in London.
Though coronavirus has put a pause on this momentum in the housing market, once the crisis is resolved, demand is forecast to pick up quickly. After all, in London, supply has not been able to keep up with the growing demand in the residential property market and rental sector. And as there is a housing shortage in the capital, this trend is likely to continue.
The London property market will slow down but not come to a halt
The government has put drastic measures in place to combat the spread of coronavirus. Due to the coronavirus outbreak and the lockdown in place, the fast-paced London property market will naturally slow down. However, the market is considered solid and is forecast to bounce back quickly after the uncertainty surrounding coronavirus is over.
During the lockdown, property viewings are not allowed to take place, and as estate agents aren’t considered “essential” businesses, they have had to shut their doors. The government has also encouraged buyers and sellers to delay transactions and moving house. Because of this, in the short-term, property price growth will likely slow down, but a crash in prices is not expected.
Fewer properties will likely be going on the market and fewer transactions are expected to take pace. However, the majority of buyers who have agreed sales prior to the coronavirus outbreak are continuing with their sales. Most landlords and buyers invest in property for the long-term, so they will not be impacted by short-term changes in prices.
Additionally, thanks to technology, such as virtual viewings and video conferencing, the sector is able to keep moving and continue transacting. Property portals are even seeing huge spikes in search numbers with the figures similar to those often seen around Christmas and Boxing Day, according to Homes & Property.
If you’re looking to buy a property in the capital, check out all of our properties for sale in London.
Overseas buyers have incentives to keep investing
We are still seeing keen interest in the UK property market from overseas buyers, who still consider the London property market as a “safe haven.” Virtual viewings and online communication are allowing overseas investors to progress and invest in property abroad. The pound has been volatile of late due to the global pandemic, so many investors are of the view that now is an attractive time to capitalise on the current market conditions.Overseas buyers could in fact help keep the London property market moving. The recent UK Budget revealed overseas investors will be required to pay an additional 2% on Stamp Duty Land Tax from 1 April 2021. This is expected to lead to more overseas buyers rushing to snap up UK property, especially in the prime London market, over the next year.
The future of the London rental market looks strong
Rental growth is likely to slow down in the coming months due to coronavirus, especially in the short-term as renters are being urged to delay moving. However, as with property prices, rental growth is expected to bounce back quickly once the crisis is over. This is especially true in London, where there is a strong need for more private rented accommodation.There is a long-term trend in the private rental sector correlating rental value growth with income growth. Once the economy and a range of sectors recover from the impact of coronavirus, income growth will return, which is expected to quickly accelerate the London rental market.
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Record low interest and mortgage rates could tempt some buyers
Recently, the Bank of England has made cuts to the base interest rate, which is now at 0.1 per cent – the lowest in history. This means now could be a great time to get a mortgage or remortgage a property as borrowing is likely to be more affordable. The current market conditions could allow you to even borrow more and get more for your money.
Borrowers who have tracker mortgages should see their rates drop, saving them money. As some fixed-rate mortgages are already at record lows, the majority of these types of mortgages haven’t seen significant falls, according to research by Which?. Overall, mortgage interest rates are continuing to drop though.
However, some lenders are pulling out of new home loan deals, and there are now fewer mortgage products available. Investors and homebuyers with secure income and the capital to put down a substantial deposit of at least 25% will likely still be offered mortgage deals from most lenders. This could provide opportunities to lock in historically low rates.
Many property professionals believe mortgage lenders will be offering particularly competitive rates after the coronavirus crisis settles down in order to attract new borrowers and to keep existing ones.
Additionally, in the medium-term, the low interest and mortgage rates will likely boost the UK property market once the coronavirus crisis and lockdown is over. This is also expected to help the sector return to stronger levels of property price growth that was seen before the spread of coronavirus began.
If you have a mortgage, we recommend receiving an up-to-date online property valuation in order to cut your interest costs. Your lender will then need to recalculate your loan-to-value (LTV) ratio. Keep in mind that a lower LTV typically means you’ll be able to get a better interest rate and have access to more lenders.
Coronavirus emergency measures to help homeowners, landlords and tenants
Many Britons are living without work or pay due to the spread of coronavirus and the UK-wide lockdown, and this could be the reality for several weeks or months to come. However, the government has stepped in with unprecedented measures in hopes to ease the financial burden many are facing.
Banks have agreed to offer mortgage payment holidays to landlords and homeowners impacted by coronavirus for up to three months. The Coronavirus Act includes a ban on rental evictions in England for the next three months as well, meaning landlords aren’t able to evict tenants who aren’t able to pay their rent because of the coronavirus crisis impacting their income.
The government has also announced an extensive amount of support for the economy, individuals and businesses. This is expected to reduce the impact of coronavirus and the lockdown and will likely allow the economy to recover quicker. In turn, this could help the property market bounce back more swiftly once the uncertainty revolving around the coronavirus crisis is resolved.
The London property market will slow down during the lockdown, but it isn’t expected to grind to a halt. As t he sector has shown impressive growth in recent months, the market is predicted to bounce back after the lockdown is over and life returns to normal.
Technology will keep the property market moving as property portals are seeing strong surges in searching and viewing numbers. This could further help the market adapt to crisis in the future and force the sector to digitise and adopt more proptech moving forward.
As buyers and sellers are continuing with transactions started before the spread of coronavirus, this shows there is still confidence in the property market. And low interest and mortgage rates could tempt more buyers moving forward.
If you’re interested in selling or letting your property, or even if you’re just curious, receive an instant up-to-date sales or rental valuation on your property from the comfort of your own home with our property valuation tool.