By Steve Taggart
When it comes to buying property in the UK, London has always been the exception rather than the rule. Just as estate agencies are generally able to predict which way the market is going, there’s always something extra to think about when it comes to the capital.
So while recent research from property experts has shown a drop in demand for property in most if not all central boroughs, in stark contrast house prices are on the up in the commuter belt.
Data from online estate agents eMoov.co.uk shows the greatest decline in demand in the UK was in the central London borough of Westminster, which experienced a drop of 42%. Whereas the likes of Reading and Watford – located on either side of the M25 circular – have been enjoying a surge in house sales.
Other poorly-performing London boroughs outlined in eMoov’s Property Hotspots Index were Hackney, Tower Hamlets and Newham. These neighbouring suburbs experienced something of a boom in the lead up to the 2012 Olympics, but demand has slumped in recent months.
Why the slowdown?
One explanation could be the revamped Stamp Duty, a tax levied on the purchase of a property. Reforms at the end of 2014 meant those buying bricks and mortar worth in excess of £937,000 would pay much more – on multi-million pound properties, tens of thousands of pounds more.
With the average price of a semi-detached in Westminster standing at £4.39m, and around £950,000 in Hackney, it is thought the markets there have suffered.
Another explanation has been Labour’s pledge to introduce a ‘mansion tax’. Should they win the 2015 general election, the party proposes a new annual charge on homes worth more than £2 million.
A third reason could be that Russia is teetering on the edge of a recession thanks to a plummeting oil price, western sanctions and a crashing rouble. Suddenly London’s property market is not as attractive to many of Russia’s super-rich, who have been selling up in droves. Without foreign investors to inflate the London property bubble, prices were bound to drop.
Good news on the outskirts
But it’s not all bad news as a slowing housing market in central London, has seen demand picking up around the M25 as it seems impossibly high prices elsewhere has reignited the commuter belt.
Evidence for this is found in the eMoov.co.uk property index where Reading placed second, having experienced a 67% increase in demand, and Sutton, Watford and Guildford were not far behind.
The ambitious Crossrail project – dubbed the largest infrastructure project in the whole of Europe – has been credited with at least some of this growth. Reading and Heathrow in the west and Shenfield and Abbey Wood in the east will be linked through new tunnels and underground stations to the centre – promising to significantly slash commuter journeys.
Combined with lower house prices, the towns on the London fringe are increasing in popularity.
London anomaly
Back in London it’s not all doom and gloom with Bexley having bucked the trend to enjoy a unique 5% upsurge in demand. According to the eMoov.co.uk property hotspots index it was the only place in the capital to experience an increase.
So while London might appear to have stagnated, the savvy buyer is already on the lookout for the next investment opportunity.
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