After a challenging few years green shoots appear to be emerging in London’s property market.
For the month of April average prices in the capital rose by 2.8 per cent year-on-year to £696,000 with a property taking around 63 days to sell, a new report by Rightmove showed.
It suggests there is an increasing demand in the capital to buy a home, in February a similar report by the property portal showed it took 84 days to sell a home and the price of a property cost £682,000.
Over the past two years, the ecosystem of London’s property market has been rocked by a number of factors.
The fall out from Liz Truss’s September 2022 mini-budget which included £45bn of unfunded tax cuts, led to a fall in value of the pound and mortgage rates to skyrocket over five per cent.
Meanwhile Russia’s invasion of Ukraine placed a squeeze on critical economies such as food and energy, leading inflation to outpace wage growth.
Rising inflation, which climbed to over 10 per cent at some points last year, also meant the Bank of England was steadily raising interest rates further, to help curb soaring costs.
This led buyers to struggle with affordability and mortgage costs, which in turn led to a slowdown in the number of homes being bought in the capital.
London house prices in April
Across the board, most London boroughs saw house prices rise during the month.
The most affordable place to purchase a home was Barking and Dagenham where prices rose 1.4 per cent during the month to £365,000.
This was followed by Bexely where prices rose 1.3 per cent to £479,000.
Harveing, Croydon and Greenwich also had properties on the market for less than £500,000.
Traditionally affluent areas such as Westminster and Hammersmith and Fulham also experienced price growth of 3.4 per cent and 1.8 per cent respectively.
Homes in these boroughs are not below one million pounds.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, told City A.M. the London market is continuing to “play catch-up as the increase in new enquiries is emboldening sellers, not only to make their properties available, but chance their arm at higher asking figures”.
“We need to bear in mind too that the latest house price indices from lenders such as Nationwide and Halifax do not include cash buyers which make up over a third of purchases and is a sector of the market which is active at present – and especially in London,” he added.
Leaf said Bank of England mortgage approvals – which set the scene for the market over the next few month – are rising, which is a good sign that the “traditionally busy spring market will live up to expectations”.
“Strong employment and falling inflation are helping too, along with the fact that the direction of travel for interest rates appears to be south,” he explained.
“The prospect of more stable or even falling mortgage rates is certainly helping to improve confidence generally.”
He added: “However, the uplift in supply has meant more choice so the market remains price sensitive and buyers are negotiating hard, particularly those who require little or no finance.”
High rental costs impact would be tenants
Monday’s reading comes as figures published last week show London was the English region with the lowest annual inflation, where prices decreased by 4.8 per cent in the 12 months to February 2024.
Matt Thompson, head of sales at Chestertons, said: “Although the number of buyers and sellers has seen an increase in April so far, demand still outweighs supply which gives sellers the upper hand during price negotiations.
“Current speculation that interest rates might be cut over the coming months could see an additional increase in buyers which could result in sellers persisting on or increasing their asking prices.”
But renting costs have skyrocketed in recent months, hindering tenants ability to save to get on the property ladder.
A report by the ONS showed last week that London was the English region with the highest annual rents inflation in the 12 months to March 2024, at 11.2 per cent, which was up from 10.6 per cent in February 2024.
Rental prices are however expected to hit an affordability ceiling this year and reach their peak.