The London property market does not operate in a bubble and, as we know from long experience, events thousands of miles away can have an impact in the capital.
It is too early to judge how the sharp drop in the Chinese stock market on Black Monday – closely followed by the devaluation of the yuan – will affect property prices in central London.
On the one hand, investors from the Far East will have fewer financial resources at their disposal. On the other, having had their fingers burnt on the stock market, they will be looking for safe havens for their remaining capital. And London, we believe, continues to represent just such a safe haven.
This time a year ago, as the crisis in the Ukraine escalated, many Russian buyers were deterred from investing in London. But we have seen them gradually come back since then.
Despite the fact that the rouble has fallen against the pound, down 45 per cent in twelve months, Russian buyers regard London as a stable market. That has been particularly true since the General Election in May, which put an end to a period of considerable market uncertainty. There seems to be no prospect of a mansion tax or equivalent for the next five years.
We have no reason to think that investors from the Far East – or for that matter, the Middle East, where falling oil prices have also depressed disposable income – will see things any differently from their Russian counterparts.
Overseas investors, as they always do, will look at the London property market in its entirety and make a hard-headed assessment of the way the market is heading. And, by and large, they will like what they see.
British buyers are increasingly eager to find new homes at this time of year, too. A traditional pattern that continues to gather pace as many people want to move in before Christmas. After all, a property is not simply a financial asset, but a place to call home, somewhere to raise a family and make memories. No wonder buying a home is one of the biggest decisions many of us make in our lifetimes.
London house prices this year have been remarkably steady by historic standards. There is nothing to suggest that they are about to nose-dive or go through the roof.
The hike in stamp duty announced by George Osborne has certainly been a dampener at the top end of the market. The annual price growth in the three months to July was 1.8 per cent, according to Acadata, down from 3.6 per cent the previous month. But the feared rise in interest rates – at one stage anticipated for late 2015 – does not now look likely to materialise until the first, or even second, quarter of 2016.
Mark Carney, the Governor of the Bank of England, remains committed to a slow and gradual rise in interest rates, but has also signalled his reluctance to raise rates while the economic recovery remains fragile.
That has to be good for market confidence – as does the fact that the construction sector is performing significantly better than in recent years. According to Markitt figures, the sector has now enjoyed uninterrupted growth since May 2013, its best performance since before the financial crisis.
A rising market is always attractive to investors, and we are confident central London property prices will rise this autumn, simply because demand continues to outstrip supply. In August, the Royal Institute of Chartered Surveyors reported that the number of properties coming on the market had fallen for the sixth consecutive month.
At Henry & James, we have been monitoring the central London property market for more than half a century. We are all too aware how vulnerable the market is to external forces. But we have also learnt from experience that, when the British economy is in reasonable shape, as it is at the moment, London benefits – and the outside world takes notice.
- Henry & James has been helping buyers and sellers in central London since 1950. For more information on houses and flats for sale or to let in the capital, visit www.henryandjames.co.uk.