We heard a lot about a fall in London house prices last year, with areas such as Clapham and Shepherd’s Bush seeing a drop of around 7%. In light of the government’s recent decision to abolish stamp duty for first-time buyers on homes worth up to £300,000, now might be the perfect time to start thinking about getting on the property ladder. Whether you’re searching for your first home or wondering where to invest, we sat down with Jonathan Hewlett, Director of London Residential Property at Savills, to find out all you need to know about the capital’s housing market in 2018...
What state is the London property market currently in?
After three years of price falls, there are signs property values in the most expensive areas of central London may fall even further, while those in other more domestic markets are coming under increasing pressure from weaker demand among buyers.
How might prices change this year?
Prices are on average 15.9% below their 2014 peak, ahead of the first significant stamp duty increase. However, the rate of price falls has slowed and values are now finding a level, albeit no growth is expected for the next two years.
Prime locations in outer London, which are more dependent on domestic wealth generation, are expected to see further small price falls this year, of around 2%, before stabilising again in 2019.
Is 2018 a good time to buy?
A backdrop of political and economic uncertainty means the market will remain highly discretionary, while the high-tax environment means that even international buyers remain reluctant to take advantage of fall in the pound’s value since the Brexit vote. But once there is greater clarity, we expect values to bounce back.
Where in the capital should potential buyers be looking this year?
It’s more a question of establishing whether a property you’re looking to buy is priced appropriately for current market conditions. Given the high costs of transacting in the prime markets since the stamp duty reform, it’s advisable to take a five-year view on this, at least.
Are there any areas to avoid?
The mainstream market is constrained by affordability pressures, so our five-year forecasts are for lower levels of price growth – averaging 7% across Greater London. It’s therefore important, particularly for investor buyers, to identify locations that have potential for prices to increase over time, for example through regeneration of infrastructure in the area.
Are there any schemes available to help people get onto the property ladder?
London Help to Buy, an equity loan scheme provided by the government is available to first time buyers as well as homeowners looking to move. The government lends up to 40% (in London only, the rest of UK is 20%) of the cost of a new build home (from registered developers), so buyers will need at least a 5% deposit and a 55% mortgage to make up the rest of the cost of purchase. The scheme is available for properties up to £600k.
How might recent changes to stamp duty affect the market?
Now that the prime market has adapted to the higher rate of stamp duty, prime central London values are unlikely to fall further.
What’s the best way to go about finding a property?
There are various things you can do but be sure to work with an agent who you trust and keep in regular contact with them, make sure that you’re ready to move when you find the right property (i.e. have your solicitor ready and mortgage agreed in principle), and don’t forget to register with the leading portals on the web.
Is there anything else potential buyers should consider?
You could also work with a company like Prime Purchase to help seek out that perfect purchase for you.
What are your top tips for those looking to buy property in 2018?
Be sure to do your homework and ensure you’re paying a fair market price – also be well prepared to act quickly when you see the right property.
You’ll need to be thinking about both the property and location when you’re buying; remember all the information you’ll need about a place is on the web, and you can do lots of research before you even visit the property.