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TODAY'S OTHER NEWS

Market Shock - “Severe correction” for London as most of UK soars

A prominent housing market analyst is warning that in 14 years of studying prices and transactions he has never seen the current level of disparity between London and the regions.

The capital’s market is on its way to a “severe correction” according to Doug Shephard, director of the property website Home. Meanwhile it’s business as normal - or even better than normal - in many other parts of the country, he says.

“Over the last six months, London sales stock levels have increased by 50 per cent. In a normal market this would be disquieting but not a huge concern as vendors could take their properties off the market and rent them out instead” explains Shephard in his latest market snapshot. 

He continues: “However, the bad news for sellers is that the London rental market is already plagued by oversupply and rents are falling, especially in the central boroughs. Until February this year, rising rents supported residential property values in the capital: now they are dragging them down.”

The Home Asking Price Index - the basis of the website’s monthly market analyses - is calculated using a weighting system using around 500,000 house prices representing the majority of property for sale on the open market in the UK at any given time.

Shephard predicts that to make London’s plight worse, some landlords are likely to off-load their properties shortly, exacerbating the glut. 

“Meanwhile” he says, ”it’s almost business as usual up north. Unlike London, northern regions have pretty much picked up where they left off pre-pandemic, reverting to their price growth trends with supply remaining moderate … The extraordinary diversity of the UK’s property market will no doubt help to buffer the negative effects of the impending disaster in the urban London sales market.”

In statistical terms, Home’s market snapshot says the supply of new sales instructions for mainland UK is up 32 per cent last month compared to September 2019, while in London the increase in supply over the year is no less than 87 per cent “and now risks a severe market correction”.

However, across England and Wales “despite surging supply the current stock count remains lower than in October 2019 by 4.6 per cent.”

  • girish mehta

    Overseas buyers will move in as they will pick up bargains. Long term people will make investments. Elsewhere the effect of Covid and Brexit still have on jobs and properties.

  • Mark Wilson

    This reminds me on the early 1990's. London was flat and the rest of the country was booming. There was a ripple effect and the the rest of the country caught up. Hard to tell what's a bargain when no one wants to rent.

  • icon

    Watch the market implode in 2021.

  • Steven Heath

    In 2021 there will be a Large Correction in London Property prices , my guess 20% . This low level of interest rates people have borrowed to their max , corvid , Brit-exit , stamp duty holiday , all make for a perfect storm .

  • icon

    A 20% correction is about right, although I've been forecasting 27% as usually markets support/resistance to further falls around 72% from peak.
    If that means an average 2 bed house/cottage in lower average London suburb (Tooting /Balham for example) is £600,000 and drops to around £425,000, it will still represent about 17 times the average salary......

  • Paul Barrett

    London is a busted flush.

    For many wirkers there is now little need to commute to London anymore.

    This will have a significant effect on the SE economy.

    Massive amounts of GDP is generated by commuting workers.

    With WFH proving highly effective the old commuting days will not return.

    Companies have seen how they may still function effectively using WFH strategies.

    Costs need to be substantially reduced.
    WFH achieves this.

    There will be no mass daily commuting return.

    There will be hub offices around the M25.
    The big expensive Central London office block is now so last year.
    Sell shares in corporate LL if you have any.

    DC pensions will be hit as well.
    Much pension income comes from office blocks.
    The best properties to have will be 4/5 bed houses with decent gardens abd parking.

    Trouble is there aren't enough of them to meet demand and there never will be.

    Commuters now need a home and an office combined.
    For that you need a house...........3 bed minimum.

    Those who can't source a house will have to settle for flats.

    But there is no doubt that the SE property market is in for some radical changes

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