A quick look on Rightmove and it won’t take long before you see a ‘Reduced’ guide price. The recent Bank of England’s mortgage rate rises are starting to bite, taking a large chunk out of what prospective buyers are able to offer to buy a home. Homeowners should try not to panic, however. A property’s value is only relevant at the moment you sell it so with any luck you should be able to weather fluctuations in the market.
The optimum time to own a home in London is nine years if you want to be sure of house price growth. Indeed, the average London homeowner will have seen the value of their property rise 45 per cent since 2014, up from £364,900 to £529,300.
“Both purchasers and sellers should be reminded that whilst it is easy to get carried away with the headlines, the current price adjustments in the housing market come after many years of significant increases in value, in many cases these representing double digit growth,” says Marc Schneiderman, Director, Arlington Residential.
“Various factors, such as interest rates, play a big part but the housing market is resilient with continued cycles of change and adopting a long-term view, we firmly believe property continues to remain a sound income producing investment with great capital value gains.”
London’s best-performing boroughs
A closer look at borough level data shows how trends differ within the capital. While in the past nine years house prices in inner London increased by 33 per cent, to £616,290, outer London boroughs far outstripped this, rising by 58 per cent to £487,660. This is largely due to the relative affordability of outer London, which has pushed many buyers further out of the centre to the fringes as house prices rise.
London’s cheapest borough, Barking & Dagenham saw house prices increase the most, up 84 per cent to £348,250. This was followed by Havering, with a 76 per cent rise to £432,920, and Waltham Forest, where prices went up 76 per cent to £511,120.
“Generally, due to the point in the cycle that this analysis tracks, it’s the outer London areas that have seen the strongest growth. This also coincided with a period when banks started lending high LTV deals post financial crisis, which strengthened first-time buyer numbers who sought out the more affordable areas,” says Aneisha Beveridge of Hamptons.
“Barking & Dagenham, London’s most affordable borough, has seen the strongest price growth over the last nine years — 10 times the growth recorded in Kensington & Chelsea.”
Bottom of the league
While no London borough saw a fall during this nine-year period, the more expensive inner boroughs had far more muted house price rises.
The City of Westminster, where average house prices are now £908,060, saw the lowest increase at just three per cent. This was followed by the capital’s priciest borough, Kensington and Chelsea with eight per cent growth bringing average house prices in the borough to £1.3 million, and finally Hammersmith and Fulham where prices increased 11 per cent to £761,700.
“It was December 2014 when stamp duty was overhauled and a new band was introduced for +£2m homes, which weighed on the top end of the market,” adds Beveridge.
Should I sell now?
Sometimes people have no other choice but to sell. The most common reasons for this are known as the ‘three Ds’: death, divorce and debt, which happen no matter the phase in the housing cycle.
Within the past nine years there have been peaks and troughs in price growth. Depending on when you bought your home, it could have been uncomfortable having to sell between August 2018 and May 2019 when London saw its biggest drop in house prices in 10 years, when £15,600 was wiped off the average house price due to affordability constraints among first-time buyers and Brexit uncertainty.
But, had you owned your home for nine years at that point, you would still have seen your house price rise from £281,800 to £463,600.
While there’s been a steady upwards curve in house prices over the last nine years, there have been periods of particularly rapid growth, when you could have bought a property and sold it two years later for a significant profit. The most noticeable peak during this period came post-Covid, between July 2020 and October 2021, when the average London home increased from £479,008 to £509,043. This was due to a combination of the stamp duty holiday, buyers using savings accumulated during Covid and the general ‘Race for Space’ fuelling a frenzied property market.
While we might be entering a period of house price falls, it’s worth looking at it within the context of a bigger picture of ebbs and flows. If you can hold out for at least some of the nine-year cycle, you’ll reap the benefits.
