For the last two years, we have seen a steady increase in house prices throughout London. However, this trend may be soon coming to an end. A handful of indicators now illustrate a weakening in the market.. In turn, first-time homeowners may now be witnessing more opportunities than in the past to obtain an affordable property within the metropolitan area. However, many feel that the ultimate trend of London house prices in 2016 is still to early to tell. What factors are behind this change and what can we expect to experience in the near future?
The Looming Brexit?
Although a good deal of focus has been placed upon the international and political consequences of the United Kingdom leaving the European Union, we should not forget that domestic sentiments are still very important. As this article from the Financial Times points out, many are wary about the future state of housing prices simply due to the fact that they are unsure how a Brexit would affect interest rates, liquidity and the business market as a whole.
What is also very interesting is that this movement in regards to London house prices in 2016 is not only reflected in average properties. High-end locations are just as likely to be affected. While prime locations such as Chelsea and Fulham still may have the lion’s share of future developments, a squeeze within the luxury market may very well force the eventual prices to drop, as this article points out. In the same respect, studies have shown that no less than one-third of those looking to sell a sub-million home within the city have dropped their asking prices. Are these trends hints of things to come?
Supply Versus Demand
The Royal Institute of Chartered Surveyors has also found that the ratio of supply and demand for London properties has now dipped into negative territory. In other words, there is more supply for high- and middle-value homes as there is a demand for them. We should keep in mind that this is more of a technical indicator, but this ratio is a good sign that a slowdown could be in order.
We should make it a point here that such a relationship may not necessarily signify an immediate price reduction. It is more likely to point to a slowdown in terms of new projects as well as overall levels of growth. It it still a fact that stagnant growth will inevitably lead to lower prices as developers and estate agents try to attract their consumer base.
London House Prices in 2016: Conclusions?
The bottom line is that this is still a watch-and-wait game. The main concern still seems to be the Brexit question. The next few months should provide much clearer answers. If you want to keep up to date with the latest news, be sure to visit Molae Properties. Although there are few certainties in the housing market, it appears that change is not far off. It will be interesting to see what the future holds.