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The London housing market outlook

The concern we have with the London residential market is that prices are only being buoyed up by artificially low interest rates (when inflation seems to be running away with itself) and the resultant reduction in variable monthly mortgage repayments. This is allowing vendors to hold out for unfeasibly high prices, often as high as the peak of 2007, which purchasers seem happy to pay as their main focus is their monthly mortgage affordability and not the property’s asking price or indeed its true value itself.
There is no doubt that interest rates will rise, the only question is when. An interest rate rise of as little as 1% will in some cases more than double monthly mortgage repayments for homeowners on historic tracker rates and any reduction in disposable income this produces will only go to further harm the already fragile retail and manufacturing sectors. Average interest rates over the past 15 years have been 8 times their current rate and many householders have only managed to avoid repossession due to an 18 month quasi mortgage-holiday courtesy of the Bank Of England’s MPC.
As mortgage affordability inevitably falls, two outcomes are likely:
1) – A dramatic fall in demand for homes at current prices
2) – An increase in the number repossessions from the same homeowners and reluctant landlords who narrowly avoided it in 2008.

The only way the market will function will be through a dramatic fall in prices and our fear is that this is inevitable. The only other scenario is that the Government and Bank of England choose to conveniently ignore their own inflation target of 2% in order to inflate to country out of debt. However a sustained campaign of this will further weaken the pound pushing up oil, food and clothing import prices to such a level that mortgage affordability will be the least of the economy’s problems.

SecureASale Ltd are always looking for development and conversion sites in London and we are cash funded and ready to buy.