What’s Happening with the London Property Market in September?

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As the nation’s capital, London has the UK’s largest and busiest property market.

The London property market has been a favourite of property investors for years, who value the high house prices and potential for rents, as well as the influx of young professionals and students who come for the abundance of opportunities that the city offers.

However, given that it is the most expensive market in the UK, London’s housing market can be difficult to navigate for newcomers to the city.

With that in mind, this blog will break down some of the major London property market news headlines for August & September 2023 that we feel investors would benefit from knowing, as well as how they have impacted those pursuing property investment in London.

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Homeowners are Leaving London

One of the main London property market news headlines in September & August is that homeowners and potential buyers are moving away from the capital in droves.

New data from Hamptons, as reported by the Evening Standard, shows that 7.7% of all transactions outside of London were Londoners buying homes outside of the M25. That makes 32,600 sales!

There are several reasons why homeowners are choosing to leave London, with them stemming back to one root cause – it is too expensive for them. Choosing the best real estate investments does require choosing up and coming areas.

Rising mortgage interest rates mean that first-time buyers cannot afford to borrow a mortgage. The rising rates are adding thousands to homeowners’ bills every year, with an average hike of £12,000 being expected each year.

30% of those choosing to move away from London are first-time buyers, and the properties they are buying are on average around £90,000 cheaper than the average price of property in London.

London Skyline

By moving away from London, new homebuyers can save £8,656 a year on mortgage repayments with a 15% deposit.

Reports from Hamptons via The Evening Standard revealed that homebuyers are choosing smaller properties with one or two bedrooms to help save money, spending around £60,000 less than last year on average.

According to data they collected, the estimate is that almost 54,000 will choose to move away from London by the end of the year. This is almost the same number of properties that are sold in Wales each year!

This is having a detrimental effect on the London property market. Mortgage interest rate rises tighten homebuyers’ budgets, and so this is having a major impact on those who would otherwise be able to afford to buy in London.

It is unlikely that mortgage rates will fall enough by the end of the year to have any real effect on this, meaning more buyers will be priced out of the capital due to how expensive it is to borrow a mortgage right now.

Because so many people are choosing to buy outside of London, the city is seeing transactions start to fall. New homes being built are not being sold, as although there is high demand in London, it is simply too expensive for first-time buyers.

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This will likely help to cause house prices in the city to fall, as fewer transactions will mean asking prices start to decrease so housing becomes more affordable.

For Property investors, this news has two ramifications.

The first is that because house prices in London are likely to fall, they are best off holding onto any buy-to-let properties they currently own in the city. With property depreciating temporarily, it means that they will make less of a profit on their investment property if they choose to sell now.

Rather, it would be a better strategy to wait until London house prices begin to rise again before deciding to sell. Property rises in value through capital appreciation, so selling at a time when prices are falling means getting less of a profit.

The second potential implication is that rental demand could start to drop in the coming months. With thousands of people leaving London for more affordable areas, there is less of a market for potential renters in London that would choose to rent instead of buying a home.

A sold property for sale

With them choosing to move away instead, this could impact the number of potential renters in the city. The lucrative target audience of young professionals, who are likely to have the salaries capable of affording to buy a first home, could be affected by this especially.

This would be bad news for investors, as luxury buy-to-let properties in central London and well-to-do areas like Kensington rely on young professionals to meet their high standards.

At any rate, this is a London property market news story to keep track of, as it could have long-lasting consequences.

Read our guide on the best place to invest in property for insight on alternatives to the London property market when it comes to your investment choices.

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High Tenant Demand is Leading to Soaring Rents

For the London property market, latest news indicates that the city is seeing sky-high rents thanks to high tenant demand, which is risking to outpace the affordability of many living in the city.

The UK as a whole has seen a rapid rise in rental costs, fuelled by an undersupply of new homes to meet the demand for housing post-pandemic.

London especially has experienced this, with already-expensive rents rising even further due to the high demand for rental properties.

The Evening Standard stated that 39% of tenants reported having bidding wars for where they live now, which is up from 9% in 2017. There have also been reports of tenants attending mass viewings, as landlords struggle to fit in all the requests for viewings.

This has led to the London rental market becoming increasingly unaffordable for many renters. One in five tenants has faced eviction in the last year across the UK, with London expected to have a higher number than this.

For investors, this represents a bubble about to burst. Since the boom of activity after the COVID-19 pandemic, the London rental market has been thriving thanks to the return to work and the ample opportunities for young professionals that the city offers.

A key for a property

As well as this, the Bank of England repeatedly raising interest rates to combat inflation has priced many out of borrowing a mortgage, meaning thousands are forced to continue to rent when in times past, they would be stepping onto the property ladder.

Depending on the postcode, London house prices can be as high as half a million pounds, with areas like West London and Mayfair being popular with renters.

This has seen rents in London rise to all-time highs, which has brought investors strong returns for the past few years. However, this looks set to begin to slow down, as income has not kept up with rental growth.

To avoid prolonged void periods caused by a lack of tenants able to afford rental property, it is likely that rents across London will need to fall over the coming months.

This will mean less rental income for landlords and buy-to-let investors, but when faced between less income or none at all, the wise choice is to bow to market changes and lower rents.

Essentially, this is a resetting of the market, as London rents have hit a natural peak which needs to calm down to meet what tenants can afford to pay.

It is likely that this ‘rental crisis’ is not the last you will hear of this property news, so be sure to keep track of recent London property market news so you stay up to date.

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House Prices Have Hit a Peak

In recent months, the London housing market has seen house prices begin to fall after hitting an all-time peak.

Ever since September 2022, where according to Land Registry data, London saw average house prices reach a record-high of over £544,000, house prices in London have gradually been falling on a month-by-month basis. The cost of living crisis is tightening the wallets of buyers, and so prices are falling as demand is easing off for houses for sale.

Right now, the average London home is worth 14 times the typical household income, and this is causing falling demand for property as a result. Given how expensive goods are in the current economic climate, many are choosing to save rather than spend, and this is having a detrimental impact on London’s property market.

Zoopla is reporting fewer transactions in cheaper areas of London, such as Enfield and Croydon. Despite having some of the highest house price growth in the city, these neighbourhoods are still suffering from their past success.

Yahoo Finance revealed London property price drops of 2.6% annually from June, according to data from Halifax. This makes the capital one of the few cities in the UK to be recording an annual fall in house prices.

For investors, this means a similar effect to homeowners leaving the city – they will benefit less from capital appreciation.

On a positive note, falling house prices will mean it is more affordable to invest in property than it was a few months ago, so if you are looking to expand your investment portfolio, the coming months should be a fruitful time to invest while prices are low.

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Learn More With RWInvest

Keeping track of London property market news is difficult and time-consuming, given that it is such a complex market.

Here at RWInvest, we have a dedicated team of property experts who can answer all of your questions.

From new-builds to stamp duty, our 19 years of experience mean that we are one of the top property investment companies in the UK and one of the best places you can turn to to learn more about property.

Looking for the best thing to invest in right now and want to invest in a lucrative UK area such as Liverpool or Manchester? Contact us today to set up a call with a member of our team, where you can learn more about what we can offer you when it comes to buy-to-let property investment.

Reece Pape Property Writer

Reece Pape

Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.

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