Barely a day goes by without a Labour politician saying that tough decisions must be made.
The Conservatives have left the UK’s finances in a mess!
Someone will have to pay!!
Which reminds me of the quotation (I think George Bernard Shaw): “There is always someone paying too little tax and it is always someone else”.
Luckily for me, they are adding VAT to school fees which means that I will now get to pay an additional 20% for the children’s education, which begs the question: do I really love them that much? According to my wife, I do…
Of course, the prospect of higher taxes for the rich has been expected for some time, as it was almost impossible for Labour to lose the election after a truly shambolic last 8 years of Conservative rule and huge infighting over the last few years.
So, what has been happening at the top end of the prime London property market this year?
Lonres reports:
“Higher value properties are underperforming the wider market, a reversal from being the strongest sector in 2021 and 2022. In July, transactions of properties priced at £5m or higher were 18.9% down on July last year. While the single month figures can be volatile, the year-to-date total is 10% fewer sales than over the equivalent period in 2023.”
Frankly, this shouldn’t have come as a surprise to anyone, because as I mentioned in my January reports, transaction levels (not prices) in London have historically fallen c. 30% in a tightly fought election year or where there is likely to be a change of government.
It is also wise to look at the bigger picture and as Lonres notes:
“Activity remains significantly above pre-pandemic levels, with July recording 34.3% more sales than the 2017-2019 July average.”
I would suggest that the 2017-2019 average is also misleading due to the dramatic fall in transaction numbers because of Brexit and Teresa May’s epically feeble election campaign which led to a hung parliament and the fear of Jeremy Corbyn. What fun times we have had!
And, of course, more recently we had the brief leadership of Liz Truss and the calamitous budget which had prominent hedge fund managers comparing the UK to a third world basket case and led to a massive hike in interest rates. This was supposed to lead to a massive crash in house prices, but as Bloomberg reported last week:
“The crash came not in prices, but in transactions. When interest rates surged, sellers couldn’t afford to buy anymore (and for a brief period, couldn’t get their hands on a mortgage even if they wanted to). But buyers had no need to sell. So all that happened was that the number of sales collapsed.
Today we learned from the Bank of England that the number of mortgages approved for house purchases had clawed its way back to just under 62,000 in July. That was the highest figure since September 2022 (which was when surging interest rates started to pinch), and is nearly back at the 2014-to-2019 five-year average of around 66,000 a month (see chart below).
How about prices? Well, according to the latest Nationwide data (also released this morning), they dipped during the course of August. But the monthly figures are very noisy, so I tend to ignore them. Compared to last year, prices are up by 2.4%, which again is the highest since late 2022. Nominal prices are now just 3% lower than the peak in summer 2022.
… Moreover, there are signs that lenders are keen to find ways to get the money to people who want to borrow it. I note that, for example, Lloyds is now increasing the maximum it will lend to first-time buyers from 4.49 times household income to 5.5 times. If competition increases, credit will loosen, even if headline rates don’t.
… As things stand, if nothing glaring changes, it does look as though the path of least resistance for house prices at this point is higher.“
The key line here is “lenders are keen to find ways to get the money to people who want to borrow it” and there is mounting evidence in the UK, US, China and, well, pretty much everywhere, that credit conditions are being loosened.
This has always driven property prices higher.
In the meantime, expect the papers to be full of bad news stories despite the fact that property and stock markets around the world strengthen. It won’t happen in a straight line but if credit conditions continue to loosen there is an astounding amount of money sitting on the sidelines which will start to move.
Does this mean that you should be acquiring a property in London now? Well, I have agreed terms on a couple of properties for clients recently and completed on others. Buyer demand has definitely strengthened and I have taken on a number of new clients in the last month. But at the same time, I have also advised some people to wait.
In short, it very much depends on your specific situation and requirements.
So, if you are considering acquiring a property would it be a waste of your time to have a 17 minute Strategy Session with me to review your plans to:
- Decide: is now the right time for you to buy?
- Ensure that you find the best property your money can buy?
- Avoid the seven most expensive mistakes you will make?
“Jeremy is fabulous; he has got real commercial insight based on years of experience and is a man of great integrity.” Chambers High Net Worth Guide
“I highly recommend Jeremy and Mercury Homesearch. I have hired many advisers over the years and this has been one of my best decisions both in terms of convenience and economics.” Mr J Roth (Notting Hill)
If you are open to having a complimentary Strategy Session so that you can make an informed decision, you can reserve one by calling 02034578855 (+442034578855 from outside the UK) or emailing my assistant, Dee, at dee@mercuryhomesearch.com.
