This guide was last updated 8 November 2022
There are plenty of reasons Londoners should be wary of buying a property in London – especially if you’re young and looking for your first property.
Some scholars – such as Paul Cheshire, professor of economic geography at London School of Economics – have even claimed that there is an impending crash and fall in property values of 40% looming over us. Others have been quick to quash these theories, but it still leaves worry in the minds of Londoners. Is it a good idea to buy a property in London? With house prices all but plateaued and efforts being made to make properties more affordable for the next generation, should London buyers even bother investing in property?
Like many questions to do with the property market, there is no absolute answer. The factors surrounding the market are not steadfast rules, but considerations that should affect your decision. Here are our top points to consider if you’re thinking about buying a London property in the near future.
It won’t be a revelation to hear that the more central your property, the more you can expect to pay for it. But you should still take care when deciding which borough you’re moving into. At the moment, properties in the borough of Hammersmith and Fulham require a very high deposit compared to that of Barking and Dagenham, which offers the cheapest house prices in London. But current value isn’t necessarily the most important pricing factor to think about. To know if it’s a good investment, you need to have an expectation of whether the property will increase or decrease in value. House prices are generally expected to keep gradually rising over the next couple of years, but this is an average for all of London, and the rate at which value increases (if at all) depends on location. For instance, the borough of Newham and Greenwich have seen prices soar more than 90% since the 2012 London Games, and they are expected to continue rising, making it a great opportunity for investment. Remember: unless the price is out of your budget, expected growth is usually more important than current value.
The London property market differs from the rest of the UK, as it doesn’t seem to concede to the same market fluctuation. In September 2017, house prices dropped slightly (0.6%) in London for the first time in eight years, but the rest of the UK saw rises in prices, with the East Midlands showing the greatest growth (5.1%). This looks like it could be another reason to be sceptical of the value of a London property – the worst fear of every property investor is that the prices drop after buying, making reselling a struggle. However, it’s not necessarily a reason to panic. London house prices are expected to stay steady, or rising at a prolonged flat rate of growth. A stable market might be more reassuring to anyone planning to buy a property in which to live long-term.
Analysing the market doesn’t just involve looking at house prices, either. It also involves analysing factors that could impact the housing market, or even crash it. The most obvious example is Brexit, the details of which are still up for debate, but whatever is decided, it will likely have an effect on the market. The referendum caused the strength of the pound to weaken and introduced an atmosphere of insecurity. But there are also other factors to think about, such as the recent Bank of England rise in interest rates. It’s difficult to assess to what extent any political or social changes will affect London markets, but thorough analysis could also be crucial to buying decision.
It’s not just the houses themselves that are more expensive. If you’re already living in London then you know how costly it can be. London’s public transport system is one of the most expensive in the world, which might seem a little unfair to commuters, considering it’s the oldest metro system in the world (and has the dirt to prove it). The average Londoner spends £118 per month on travel and also has to deal with regular breakdowns and maintenance. This might not seem like a major factor when deciding to buy a property, but that £118 could be drastically reduced if you live in an area that is a convenient walking distance to where you need to be. Imagine adding £118 to your monthly mortgage payments – that’s what you might have to do if you decide to live anywhere outside of zone 2.
Other major UK cities often have expensive public transport too, such as Manchester, whose bus and tram day passes are more expensive than in London. This is compensated in Manchester, however, by the lack of congestion charge. If you’re planning to drive in central London on Monday-Friday 07:00 to 18:00, you can expect fees upwards of £11 per day. Calculating the cost of living might be tiresome and slightly discouraging, but it’s important that you have a realistic idea of how affordable it will be to live in London and pay back your mortgage at the same time.
These are just a taste of the factors to consider if you are buying a property in London. Don’t be discouraged by any reports saying it’s a bad time to buy – instead, judge the current climate for yourself. If you’re still concerned about a crash in London prices, then you shouldn’t worry too much. Based on historical data from the 2007 market crash, eMoov.co.uk calculated that it would take 7.7 years for the UK to recover to current prices, and less than five years for property in London. Even if it did happen, you’ll probably only be affected if you were hoping to sell immediately.
As always, these factors are relative to your circumstances. The only way to really get a grasp on the level of risk you are dealing with is to talk to a professional with years of experience in the London property market. Talk to us if you would like insight from property experts based in London.
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