London property market remains strong

By Hugh Wade-Jones – Managing Director, Enness Private UK, April 2016

The London property market has had a lot to weather of late. Between them, the Mortgage Credit Directive (MCD), Spring Budget and impending EU referendum have sowed the seeds of doubt in some minds, and prompted questions about the capital’s long-term real estate prospects.

Happily, those doubts are not backed up by the figures. The most recent data from banks and building societies shows that mortgage lending hit £17.6bn last month, compared to £13.6bn in February 2015 – a leap of 30%. This is the highest amount lent in a February since 2008, and comes in spite of a 5% fall from January’s total.

Gross lending figures do not take repayments into account, and remortgaging activity has also been very strong. Savvy borrowers are capitalising on some extremely competitive deals and record-low mortgage rates as the timeline for the Bank of England base rate rise is extended. There is still a fundamental dearth of housing in the capital, and ever-growing demand has fuelled lending.

The question, then, is whether or not this impressive year-on-year growth is more of a last hurrah than an upward curve. It is true that in the short term, housing market activity has been boosted by a mini buy-to-let stampede as buyers rush to complete their transactions before the stamp duty deadline. This has led to fears that activity will fizzle out after April, with the overseas investors who propel the market put off by the increased tax burden on their shoulders.

Of course, the stamp duty increase means upfront costs will be higher. Investors will need to do their homework and make sure the maths still works out on each new purchase. But will this be enough to turn them away from London?

So far, there are no indications that this will be the case. The supply and demand gap, currency fluctuations and the excitement surrounding Crossrail are all keeping eyes firmly fixed on the capital’s bricks and mortar.

Since the beginning of the year the pound has been steadily weakening against most currencies, giving those looking to transfer funds into the UK a huge boost. Anyone from the US, Europe, Hong Kong, Singapore or the Middle East will find they have far greater buying power than they had even six months ago.

Money always follows infrastructure and transport initiatives and they don’t come any bigger than Crossrail, the largest construction project in Europe. Due to be completed in 2018, it will inject money into the areas around stations – Farringdon, Whitechapel and Clapham – as well as lifting the capital as a whole. These are exciting times to be investing in London.

The stamp duty increase should be taken as pause for thought, rather than a killer blow. There are no signs interest is going to wane after April; the positives still outweigh the negatives, and the smart money is better off in London property than any other asset class.