As homeowners and buyers we all have an opinion on what property is worth in our area. Indeed, many people have made a fortune by speculating or even just by staying put while prices have risen.
In previous decades this was a hot topic of dinner conversation, but since the advent of the internet, property prices have become very transparent. You can now find your address on zoopla.com, fill in a few details and be told in an instant what your house or flat is worth.
What is now more difficult to predict is what might happen next. Lets take a look at the factors affecting house prices and demand in West Hampstead for the next 12 months and I’ll give you my best guess on where we could be at the end of this year.
Successive governments have promised the end of ‘boom and bust’, but none have been able to deliver. House prices have ebbed and flowed with the economy, gone pop when the bubble has burst, and then recovered to start the whole pattern again. But, as a nation fixated on home ownership, we have all willed prices ever upwards and this longer-term trend has almost become predictably reassuring. After all, despite the ups and downs, London prices doubled every five years up to 2007.
This time, however, I think things are a bit different. There is now a huge difference between London and the rest of the country. Legal and General predicts that the UK market has now hit bottom but prices will not start to recover until 2017. Prices in London, meanwhile, have already far outstripped their 2007 peak and in some prime areas they are already 50% higher! The difference is that this price increase is being fuelled by the high demand for the relatively few available properties – transaction levels remain half of what they were in 2007.
West Hampstead sellers must face the decision of whether to hold out for another 12 months in a rising market, or whether to sell and pre-empt the possible bursting of the bubble. Buyers of course are hesitant to commit at prices that might tumble, but are more anxious about not eventually paying more for the same property if they wait, especially if they have to move. Lenders are cautious for the same reasons and require more security and certainty. These factors, together with overseas buyers looking for a safe haven for their cash, have all driven the increase in London house prices since 2010.
The big question is how long can London prices keep going up? The answer seems to be for quite a while longer. There is no indication that the factors affecting prices will change in 2013. Supply will remain low and demand high. Recent news regarding increased lending at lower rates will create more room in the market for price rises, and the levels of investment in new-build housing remain at record lows. The only threats to further price rises would seem to be a sudden interest rate rise or the impact from another global economic shock.
In their recent forecasts, Knight Frank, Hamptons and Savills all predict a levelling off of prices in London with small rises of between 1% and 2% in 2013. This seems cautious to me (they said 2–5% last year) so I shall stick my neck out and say we should expect to see rises of between 5% and 10% in West Hampstead in 2013. The basic economics of supply and demand is my reasoning.
Thanks for all your comments and feedback from last month, please keep them coming. Next time, I’ll look at how estate agents work and raise the sometimes controversial issue of fees!
In the meantime, I wish you all a happy and prosperous 2013.