In this insight piece, Warren McCann, area director at Douglas & Gordan, shares the latest findings for the London housing market.
We see the busiest sales market in London since pre-Brexit in 2016. After six years of a very flat housing market with sales volumes down 50% across the market, we see volumes return to pre-Brexit levels.
The end of the stamp duty holiday hasn't slowed the market. Today, our under offer pipeline is the largest in 6 years; buyers are buying.
Rents have soared by up to 40% in popular areas as the world has returned to London. There was a dramatic surge of people who returned to the capital briefly last summer.
The seismic shift in demand caused a draught of available housing, pushing rents to an all-time high. As workers continue to pour back to the capital for opportunities, the shortfall in housing is compounded. London is looking cheap Globally, with the pound's value significantly lower than pre-Brexit times.
The upward shift in rental costs has pushed more people to rethink the amount of money they are wasting by renting. Rent is dead money! Mortgage rates are also rising, making some people think, "Have I missed the boat?".
The answer is yes, you have. The best deals were available during the time of most uncertainty during Brexit and the start of the Pandemic. The best time to buy was yesterday. The next best time to buy is today. The housing crisis in London is not the property price; it's the lack and availability of stock.
So why is there not bucket loads of property on the market? Very simply, there is no panic to sell. Over six years, we have not seen prices rise. Investors and homeowners are waiting for their moment. Why would you sell if the prices are rising and the rents are the best they have ever been. There is no panic. There is no rush to sell. Simply property owners will only sell if there is a better investment to put their money into.
Money has been the lowest in history to borrow over the last few years, so homeowners have no pressure.
So why are people returning to buying? The reality is that it's cheaper to buy than rent monthly. Compare renting a property for five years and buying the same property. The maths are simple. Renting, you will never see that money again.
It's lost, gone, dead money. If you buy, you are secretly saving by paying off the capital. You also have capital appreciation so you can make money.
So after six years of reduced sales volumes, is it not plausible that there will be a rebound! Looking at the history of property prices, we are due a bounce, and I don't think that property will increase in small increments.
When there is a surge, the prices bounce to a new norm. Is it not inevitable that price will continue to rise with inflation like everything else in society? Do cycles and patterns in history not highlight what will happen again in the future? What were house prices 20 years ago? What were they 50 years ago? What will they be in 10 – 20 years? The patient investor who looks at property as a long-term investment is likely to reap the rewards.
UK's National debt increases at £5170 per second and is in the Trillions. Are we not going to see the cost of everything continue to rise to help ease this over time?
*Warren McCann is the area director at London estate agents Douglas & Gordan