The economic cycle we enjoy in a free market is inevitably cyclical and the boom/bust that can occur came to a head in the last quarter of 2007. Residential property prices in London and around the UK peaked during the last quarter of that year.

For the next 6 months, very little happened in the London property market as banks around the world looked into the abyss their traders had created! Most people battened down the hatches to see where the financial crisis was going to take us all. The ‘Credit Crunch’ was definitely crunching!

For most of 2008 the London property market struggled, with a reduction in demand and an increase in supply conspiring to cause property prices to fall. In 2009 however, as a result of a sustained period of historically low interest rates and a noticeable improvement in value for money, particularly for the overseas buyer, the London property market rallied. Prices increased by varying amounts from one location to another - one property type to another. But the increases and the tentative start of the housing market recovery in London was palpable from early 2009 right through until early 2010 with some sectors of the London market experiencing increases of as much as 20% during this period.

Throughout much of the latter part of 2010, buyers were slightly more cautious again, with many people unsure of the strength and sustainability of the economic recovery.Whilst none of us are really sure what the immediate future holds, most seem confident that the UK economy is now on the mend with strong progress in the US helping that cause.

Many of our clients in 2009, 2010 and 2011 have been cash buyers, (100% cash - no mortgage finance at all), recognising that an asset like property, given low interest rates, is more likely to yield a reasonable return in the short to medium term than most other investments - particularly with the inflation led recovery that seems likely to occur. 

Due to a weakened sterling we have seen the return of many overseas buyers to London in recent years. Indians, Asians, Russians and Americans alike all seem to have the same belief; that value for money in London is reasonable, (helped enormously by more favourable exchange rates), and that London is still one of the best property markets in the world to invest in if you are seeking a combination of relative stability and growth. In recent months we have seen an increasing number of Greeks and Italians too……………..

Mortgage rates for buyers with significant cash deposits continue to improve and now offer much greater parity with Swap rates - although still have some way to go!Clearly we all rely on confidence returning to the market as well as improving finance - this will not happen overnight. As such, sellers should continue to produce a good product but also be realistic when setting their asking price and buyers should continue to make reasonable offers, based on sound knowledge and research.

Interest rates are as low as they will go and whilst we expect them to stay at present levels for 2012, any further stimulus to improve confidence must come through a sustained period of economic stability. This coupled with improving and more appealing mortgage deals from the main banks will all help move the market into a sustained period of recovery. Additional bold initiatives like a temporary cancellation of Stamp Duty would help - however we do not think the government will do this for people buying above the 3% or £250,000 threshold. Therefore the most likely cause of a sustained improvement in the London residential property market will be through economic and banking/financial stability.

As I write this, house and flat prices in much of prime London are now higher than they were before the Credit Crunch - why? Partly because supply is again very limited. Partly because of overseas investors, (Exchange Rates and the devalued GB Pound etc.), partly because many UK and overseas buyers have been taking cash from depleted investments that are unstable in stocks and shares, partly because cash in the bank is being eaten alive by increased inflation, partly because people wish to take their investments out of the Eurozone for fear of an implosion of the Euro and partly because many now feel that cash in a bank is not as safe as it used to be. So for a whole host of reasons, many people are buying London property for investment - London is considered to be a relatively ’safe bet’. After all, where else can you get a return of 5% per annum?

We would be pleased to offer balanced and objective advice regarding any residential property matter, without obligation, so please contact our Founder, Alastair Crowhurst for more information.

We would welcome your call to answer any specific questions you may have, without obligation.

Alastair Crowhurst

Founder
Crowhurst and Co.
London
UK

Office - 0845 370 7373

Crowhurst & Company are able to offer you a dedicated and very personal home finding service, culminating in an experience which for most will be their first taste of a hassle free move. As a buyer you will surely benefit from our very own network of established property contacts - we will also save you a great deal of time!

Our clients return time and again to employ our services so please feel free to contact us to understand how our knowledge of the market and our extensive contacts can combine to give you the very best chance of success when buying your next property. We offer you absolute peace of mind, taking care of ALL the details, no matter how small, making your needs our considerations.