It was back in 2016 that London house prices were at their peak of unaffordability, but new reports from Zoopla show that the average cost of a property in the capital is now down to 2014 levels. Latest figures also show that the city is leading the country in buyer demand, proof, if it were needed, that this still remains a hugely popular place to call home. However, the data also tells us that the usual property price is now 13 times higher than the average earnings.
Whilst this is undoubtedly an improvement on 2016 - when the average was 15 times higher - it’s still out of reach for many aspiring homeowners. There’s also the issue of mortgage rates, which have doubled since 2021 and are still a lot more than in 2014, when the Bank of England’s base rate was 0.5%. The good news is, that rates are expected to fall below 5% in 2024, which is significantly better than last year’s peak of 6.86%.
With the supply of new London homes now 22% larger than even just a year ago, demand for property continues to rise. This gives buyers more choice, many of them encouraged by the fact that mortgage rates, whilst still high, have recently come down. Indeed, Zoopla has reported that the market continues to favour buyers, with over one in five sellers having to reduce the overall price by 10% in order to ensure a sale. The message is that, ultimately, sellers must price realistically as we go into 2024.
Richard Donall, Executive Director at Zoopla, said, ‘This improvement in activity will support sales volumes which, at one million, reached an eleven-year low in 2023. We don’t see these trends as a precursor to higher prices in 2024 as it remains a buyer’s market. Sellers looking to move should be encouraged by these early signals, but buyers remain price-sensitive and focused on value for money. Over-optimism by sellers could quickly stall the current improvement in market activity.’
It certainly seems as though 2024 will see more freedom for buyers, especially when compared to the shortage of stock that’s defined the previous few years. Buyers are in a much stronger position now, meaning they can take more time to find the right home for them. However, the number of properties coming onto the market - whilst undoubtedly increasing - is only just reaching pre-pandemic levels and there’s no indication there’ll be a return to the highs of 2014 any time soon, despite things being at their strongest since that period. That said, with more homes becoming available this year and fewer buyers in general, sellers should be able to successfully make a sale, just as long as they price competitively.
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Sources: City AM, The Observer, The Telegraph