Our brilliant new property writer shatters the idea that London’s property market is infallible and explains why watching prices alone is misleading
If you live in London you’re bloody lucky. If you work in London you’re bloody lucky too. I was reminded of this upon listening to a German businessman talking about eating sausages at a Christmas fair in Frankfurt this afternoon, when he also happened to say that it was difficult to escape the impression that the world’s ills seemed to be passing him by.
For Londoners, the same sometimes feels true. This is partly because, like the Eurozone, we live in a country where surreally low interest rates are designed to service the vast majority of the country. For London, interest rates are way too low.
The chances are if you live in London you’ve got a half decent job and most likely enough money for the current gold standard 40 per cent deposit, meaning a mortgage can be had at rates that beggar belief. Every time the Bank of England presses a button and releases another round of QE you would do better to substitute the word “devaluation” being bandied around, because UK assets, in particular central London property, appear irresistible to foreign investors and well heeled residents alike when our currency plumbs new depths.
If you’re selling London property you might assume you’re also escaping the worst.
But – and it’s a big but – the problem is that reporting of house values often concentrates solely on values, and NOT sales volumes [ie. The number of houses being sold]. In central London, property values today are comfortably above the 2007/08 peak. But volumes are more than 50 per cent down. This gives the lie as to why values are holding up, but unlike De Beers, it’s not in our gift to decide when to loosen supply.
So although the press reports the central London property market as great, a truer reflection gives a worrying snapshot of an industry in serious danger of disappearing up its own gilded backside.
Look at the evidence: 2008 saw a huge number of job losses in property – perhaps as many as 35 per cent of all individual estate agents lost their jobs. Most agency offices went from three or four to one or two employees. Unless volumes of property sales improve, central London companies will soon have to face some hard realities. So all is not quite what it seems.
A floating currency has proved a useful bulwark against the economic battering dished out across the Channel, but the UK government needs to remember that with UK Property PLC is worth almost 10 per cent of UK PLC. Perhaps the government needs to work out how to keep this particularly British obsession with property alive and kicking and not focus solely on The Square Mile.
I’m never quite sure whether we really are more obsessed than our neighbours with property, but there used to be a mobility about property owners here that’s now sadly lacking. Swingeing Stamp Duty rises have seen many a property move put off. There seems little hope of salvation given the current austerity push.
Brits tend to hold on to their properties in London for about five years before selling them. But, sadly, property bought by foreigners in central London seems to be held for a generation, thus disappearing off the market for that time. So in the short term we won’t see an increase in sales volumes there, either.
Overall, the only likely scenario for seeing volumes increase is a chronic weakening of the Euro that might just turn Europeans into net sellers rather than net buyers. That would promote volume but at the expense of prices, and that’s a tough dilemma.
Ed Mead has been an estate agent in Chelsea for over 30 years. He sits on the Board of the Property Ombudsman and has written about property for the Sunday Times and the Telegraph. He’s never afraid to say what he thinks and is a tireless campaigner for higher standards in estate agency.