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London property bubble predicted to shrink, not burst

London’s property market has been a world apart from the rest of the UK for many years. And while forecasters have been predicting a bursting of the bubble for seemingly ages, until recently the markets haven’t paid the least bit of attention. Year on year, the growth of property prices in London has been staggering as supply failed to keep up with demand.

While there’s been nothing as violent as a bubble bursting, the London market is now predicted to shrink slowly over the next couple of years before staying flat. However, the predicted cuts of 1.5 per cent and two per cent across the next two years will do little to equalise the cost of property in London with the rest of the UK. Nevertheless, the predicted contraction of the market does signify a small watershed moment.

Pricey London property has been increasingly difficult to afford as the years have rolled on. There has been investment from abroad, yes, but ultimately foreign investment has not completely outshone the contribution of those who live and work in the capital. Ultimately, the value of vast swathes of the property market is limited by the amount ordinary Joe Soap can borrow. Predictions are that London’s property market will see new growth in some three years’ time but unless wages increase, or foreign investment really is ramped up, I doubt we will see major gains in London.

However, this does present an opportunity for the rest of the UK. Uncertainty surrounding Brexit does not seem to have dampened investors’ appetites for property elsewhere and Far Eastern money is still flooding into other cities.

Predicted five-year growth of over 10% (and even up to 18% in Manchester) will be very attractive to developers. Despite a confused planning regime and limited government incentives, developers are taking advantage of a renewed interest in property investment and a buoyant regional market to get new developments up and running. Certainly, our developer clients have no intention of slowing down and banks are as keen to lend as they ever have since the recession. Brexit lingers not too far away, whispering of market upheaval, but confidence remains high. Northern land prices may have increased but have reached nowhere near the cost of London and the surrounding commuter belt which is certainly good news for developers who have been forced into narrowing their margins for many years.

While we cannot get away from the unknowns of Brexit, the indications do point towards a resilience in our economy which should continue while confidence remains high and bank purse strings remain loose.

This was posted in Bdaily's Members' News section by Gail Titchener .