London is suffering a property drought — with a shortage of homes for sale said to be the cause of the capital’s steady rising prices.
The latest research shows that on 65,000 homes went on sale in London in the first six months of this year – compared with 87,400 in the same period three years ago. Meanwhile, according to the study from Home.co.uk, the number of new homes coming to the market has fallen by two thirds over just six years. Experts say that this shortage of homes on the market is the reason London house prices continue rising, as buyers UK and foreign buyers compete for what is available.
Estate agent Savills has recently revised its price forecast for the next four years, and is predicting prices in London will boom by 25.1 per cent by the end of 2017.
“Home price rises in and around London seem to be relentless,” said Doug Shephard, director at Home.co.uk. “Affordability issues for home owners, let alone first-time buyers, are growing and hinder attempts to move. Consequently, the capital finds itself in a bizarre situation: market prices are showing signs of overheating but, despite this, they are being further inflated by the severe drought in property stock – the characteristics of a classic investment bubble.”
The main reason for a reduction in new homes is simple: the market is paying the price for the recession-driven building slowdown meaning fewer homes were started in the 2009 to 2011 period leading to fewer completed homes today.
When it comes to “second hand” homes, buying agent Guy Meacock, a director at Prime Purchase, agreed the capital’s property stock is desperately low with buyers outnumbering sellers. “This is fueling property prices and will continue to do so until there is a massive shift.’’ Such as a reduction in Stamp Duty on homes over £250,000, and possibly an interest rate rise.
Meacock believes a particular reason for this imbalance in south west London is that a flood of buyers priced out of prime London are now looking south of the river, creating a classic sellers’ market.
Meanwhile, across London the cost of moving, plus stamp duty, makes it so prohibitive that home owners put on an extension and staying put. And rail fare rises are preventing families from moving to the country.
Tim Day, managing director at Tim Day & Co estate agents in Kensington, adds that homeowners are also concerned about the fact that if they take themselves off the ladder in London they will never be able to afford to come back. And comfort themselves with the fact that the house they are in is making good money.
Ed Mead, director at Douglas and Gordon, estimated stock was down 40 per cent compared to peak levels in 2007, and that one in 10 sales now go to sealed bids. However, he said that sellers didn’t have things all their own way. “This is not a 2007 market where everything is selling well,” he said. “Good property, which only accounts for around 20 per cent of total stock, sells easily. The rest need to have reasonable expectations.”