If the bubble were a balloon then it hasn’t so much burst as been untied and blown around the room deflating and losing all forward momentum and energy over the last few weeks.
All of the industry heavy-weights and recent press coverage are reporting falls in asking prices and buyer demand across London; West Hampstead is no different. Rightmove has reported asking prices in London now at a virtual standstill for June and July, although it says prices are up 14% year on year. Sequence reports a month on month fall in June of 14% for new applicants whilst a Hometrack survey of Estate Agents in July tells us that house price growth in London has slowed ‘dramatically’ and is the weakest in 18 months with agents finding it “hard to push prices in the face of weakened demand”.
The Hometrack findings seem alarmist and in my opinion, simply mark the end to ‘open day frenzy’, ghost gazumping (being forced to raise your offer due to the increasing market alone) and ‘sealed bids’, which is no bad thing. It feels like the market has stopped off at the service station whilst affordability and common sense catch up.
There is no doubt however that demand has fallen significantly over the last 2 months and the question most buyers and sellers are now asking themselves is whether this is a seasonal blip or a longer term trend. The reasons for the slowdown in demand have been well documented and speculated about over the last few months; stricter lending affordability stress testing for mortgage applications introduced from the MMR, the spectre and inevitability of rising interest rates, the strong pound making London property less attractive to overseas buyers, next years’ election getting closer, press speculation over the ‘London bubble’ and strategic rhetoric from Mark Carney. All of these factors have combined to alter buyer sentiment to a ‘wait and see’ view rather than the bun fight that epitomised recent months.
There is, however, one overriding factor driving the London market and that is the supply of property and land compared to the increasing population and long-term demand, which must mean that prices will continue to rise over the long term although hopefully in a more controlled and steady way. We are anticipating a quiet summer with little or no growth in asking prices followed by a return to a more normal market in September.
In an earlier Property News this year I wondered what tools Mr Carney had available to him other than interest rates to control the UK housing market. We now have our answer and they have been very effective and imaginative tools. If we have successfully avoided the ‘boom and bust’ of previous attempts it looks like the UK housing market could be in very good hands. All we need now is to sort out the planning system.
On a separate note, I noticed that soon after the last Property News ‘Build high or fiddle while Rome burns’ Camden Council has announced plans for a 14-storey tower block at the Liddell Road site. I was surprised at the amount of objection to this proposal. A much needed development that provides a school and one- and two-bed flats close to transport links at no cost to the taxpayer seems like a good idea for West Hampstead. Surely, it is only with the increase in supply of new homes that we can hope to make London affordable for future generations of key workers? Light industrial sites close to railways make ideal sites to build high with the least impact on surrounding conservation areas or green belt land further out.