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London’s housing market balancing act

Two major realities continue to cushion the London property market as we enter 2023. Firstly, there is the presence of overseas investors, who still see the UK Capital as a rock-solid bet. Secondly, the unavoidable laws of supply and demand are preventing any sudden price drops. In London, the shortage of available housing stock is simply a fact of life.

The mood of the market reflects a gentle cooling off. Rightmove reported price dips of around 1.5% between November and December and although January saw a rally of 0.9%, the general direction is downwards. Double digit inflation and cost of living concerns have bitten into an economy that was already having to deal with the fallout from last September’s polarizing mini-budget.

The fact that the property market remains calm is largely down to the sheer amount of capital that the prime central London residential sector generates. Even in second gear, this formidable economic engine has been able to stay resilient for much longer than first anticipated. Not having to depend on lending availability certainly helped and we can expect these same neighbourhoods to be at the forefront of London’s inevitable bounce back.

Fuelled by an enticing Stamp Duty holiday, areas all over the UK saw record numbers of deals during lockdown. Of course, this had to end sometime and a period of normalisation has set in. This should not, in any way, be viewed as a crash or a burst bubble. We are witnessing what healthy, mature markets always do: absorb, stabilise and self-correct.

Bank of England set to upgrade its forecast

Property commentators are unanimous about one thing: price drops of around 5% are likely. There will, however, be no return to the torrid times of the 2008 banking crisis and no wave of defaults or panic selling. In fact, with signs that the interest rate rise is reaching its peak and the Bank of England reviewing its forecast in light of recent IMF reports, we can look forward to prices picking up by the beginning of summer.

Meanwhile, the combination of sluggish sales and a super-buoyant rentals market is giving rise to a slew of “accidental” landlords”. With prospective buyers put off by high interest rates, sellers are finding the red-hot rental demand for their properties difficult to resist. As an experienced estate agent with lettings branches across London, we are obviously in a good position to assist should they decide to take this route.

Investors looking for a deal should be ready to act.

In the long run, sellers are ready to adjust their expectations when it comes to pricing their properties. In anticipation, prospective buyers will be holding back slightly, in order to get the best deal. While there is a distinct difference between those who need to move quickly and those who are willing to wait, getting the right price is a matter of planning and timing. London’s Zones 2-5, in particular, are areas where buy-to-let investors will be prompted by a weak pound to capitalise on the any softening of prices.

Ever with their fingers on the pulse, our UK Directors are visiting Hong Kong in February. Their presence will be the main feature of a series of property investment events and advice clinics, intended to point investors in the direction of some of the best deals on the London property scene. These events are free to attend, but sign up is essential to avoid disappointment.


About the Author

With over 60 years of experience in London market, Benham and Reeves offers a comprehensive one-stop service which includes London property sales (purchase and selling) and full letting and management services to investors. Benham and Reeves Hong Kong SAR office was established in 1995 to provide real estate agency services to Hong Kong buyers, sellers and landlords in regards to all their London property needs.