London house prices are showing signs of recovery since 2016. This is according to Zoopla, which says that London house prices came back up again for the first time in three years. The property portal said that the rate of property price growth in London has increased to 1 per cent annually, up from -1.1 per cent a year ago. This is the highest rate of growth for house prices London UK for two years, following a period of year-on-year price falls.
Over the recent years, Brexit proved to be a turning point for house prices London UK as the after-effects of the UK-EU separation knocked down house prices. Traditionally a hotspot for property, house prices London UK have slumped as the city has been one of the most affected regions across the UK, with a slow growth rate over the past few years.
However, the scenario improved recently as house prices London UK are up again.
House prices are registering month on month price falls in less than a quarter of London’s housing markets – down on the 85per cent of markets registering price falls a year ago and the lowest coverage of price falls since May 2017.
Over three quarters of London’s homes are in markets registering small month-on-month price increases.
The shift in London house price momentum is down to a decrease in the number of new properties for sale, which has restricted supply. This has been attributed to the announcement of General Elections in December, apart from the ongoing Brexit crisis.
The property portal explained that when the market began to weaken in early 2016 there was a marked difference between the price of new listings coming on for sale and the prices being marked as ‘sold’ on the Zoopla website.
The gap has been steadily closing and this will encourage growth in sales in London in 2020. However, it still expected growth to remain in ‘low single digits’.
Richard Donnell, director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life. The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.”
The scenario was similar across the UK as house prices showed improvements. Zoopla said that house price growth across UK cities has picked up to 2.9 per cent.
However, the large regional cities, which were the hotspots of house price growth earlier, are starting to show signs of slower growth. Although some of these regional cities have seen a rise in house prices, the rate of growth has been relatively slow as cities such as Edinburgh, Leicester, Manchester and Birmingham saw house price growth of less than 15 per cent since the start of 2017. The annual price growth for all the cities covered by the index has been less than 5 per cent for the first time since 2012. While Leicester saw relatively impressive house price growth figures, Aberdeen reported a negative growth. Leicester reported a house price growth of 4.7per cent, whereas prices plunged by 5.9per cent in Aberdeen.
Donnell added: “Market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability. The rate of growth is slowing, and all cities are registering annual growth of less than 5per cent.
“The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”
First time buyers
However, house price growth may have an adverse impact over the first time buyers as they have been reaping the benefits of the negative price growth in the capital, and make it more difficult for them to climb onto the property ladder. Since it is already difficult for the first time buyer to purchase a home, a rise in house prices may further reduce the opportunities available for first-time buyers.
Josef Wasinski, co-founder of Wayhome, said: “These figures will cause further frustration for aspiring homeowners struggling to afford the deposit needed for today’s property prices. With first time buyers and housing at the forefront of party manifestos, we need to move beyond the rhetoric and be confident that the proposals will become policy alongside alternatives which provide realistic pathways to homeownership for those looking to get on the ladder.”
House price growth in the capital may make other cities across the UK more attractive to first time buyers due to the slow growth in these cities. As such aspiring homeowners struggle for a deposit needed for buying a home, a further rise in property prices may turn them to other cities as they are registering growth, but at a slower pace.
Luxury London homes
Meanwhile, property prices in luxury London addresses have been predicted to rise over the next five years.
After a prolonged period of sluggish sales and discounting, the price of a luxury home in the heart of London is set to climb 20.5 per cent over the next five years.
According to the Savills annual housing market report, published, prices will nudge down two per cent in the 12 months to this December.
However, the price of high-end properties in London are predicted to rise next year. It will be the first annual price rise (of three per cent) since 2014.
Property values are then predicted to rise six per cent in 2021, four per cent in 2022 and 2023, and two per cent in 2025 in the capital’s exclusive locations of Belgravia, Knightsbridge, Mayfair, Kensington and Chelsea, Marylebone and Notting Hill.
Therefore, as of now, the scenario seems encouraging for the London residential property market. Though the city currently lags behind some of the other regions of the UK in terms of house price growth, the fact that it has bounced back after a slump of three years is encouraging for the city’s residential property sector.
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