What an exciting couple of weeks it’s been in the property market.
A recently refurbished, four bedroom apartment in a secure, gated development just off Whitehall has been on the front pages of every national newspaper. London property developers are wondering how the refurbishment only cost £200,000.
We already knew that Dominic Cummings was a man who understood the power of telling people what they want to hear. However his bombshell that the Prime Minister isn’t a fan of the nation's favourite retailer might be Cummings’s most devious moment yet.
Boris has surely lost the Home Counties vote.
A demand driven market
According to Zoopla, The first 15 weeks of 2021 saw £149 billion worth of homes sold across the UK, double the amount sold in the same periods in both 2020 and 2019.
Chestertons reported that March saw a 57% increase in the number of people looking to buy a property in London, the most active market since 2006. This was reinforced by Knight Frank, who revealed that the same month saw the highest number of exchanges across the UK for ten years.
HMRC followed suit, announcing that revenue from Stamp Duty had increased 22% year on year, earning the government £1.196 billion in March, despite the current 0% rate up to £500,000.
Whilst the Stamp Duty holiday is clearly playing a part in these increased levels of demand, it’s not the sole reason. In early April the IMF said that the UK economy would grow up to 5.3% in 2021, up from January’s forecast of 4.5%.
Anxiety over the end of the furlough scheme could be misplaced, with economists now predicting that the potential fallout won't be as bad as initially feared.
The pre-pandemic unemployment rate was below 4%, a figure labour economists consider ‘real zero’.
The Office of National Statistics forecast an unemployment figure of 5.6% in 2020, revised down from 6.8%. It now expects unemployment to peak at 5.9% in 2022.
Parklife
I have spoken in recent weeks about the impact of both private outside space and proximity to local parks on both the demand for and desirability of homes, and this is now being recognised in the available data.
According to Savills, the price of living close to open space has increased over the past year. Buyers can expect to pay a premium of 15.3% to live within 100m of one of central London’s parks, up from 13.4% in 2015. The premium increases to 28.1% for properties within 50m.
The same trend is also apparent across the wider prime London market, with the pandemic having an impact on what buyers consider to be most important in a home. A year ago, only 31% of Londoners ranked proximity to a park as one of their top two priorities. That figure is now 57%.
In comparison, proximity to a tube station or place of work have become less important. Only 39% of Londoners ranked being close to a tube as one of their top two priorities, compared with 63% a year ago.
What about the kids
It’s been over 10 years since the last price correction in the London property market. During the global financial crisis, house prices fell 16%. Since then, the trajectory has been mainly upwards.
The global pandemic has done little to dampen this trend, with the Nationwide reporting 6.5% year on year growth between the end of 2019 and the end of 2020.
The Government has put a flag in the ground here. The Stamp Duty holiday and the return of 95% government backed mortgages indicates that they see an active property market as key economic growth.
This is underwritten by historically low interest rates, meaning affordability is currently less of an issue. In most instances mortgage payments are lower than rents for comparable properties.
Lenders are also responding to this government backed drive to home ownership. Earlier this month Nationwide changed the amount it would lend as a multiple of annual salary from 4.5% to 5.5%, but only on its 5 or 10 year mortgage products.
In my March market update I discussed the impact of not enough homes being built to meet demand.
As a result of both increasing prices and less stock than ever before, it’s becoming increasingly difficult for first time buyers to get on the housing ladder.
Data compiled from Zoopla, Chestertons, Knight Frank, HMR, IMF, ONS, Savills & Prime Resi
Things I’ve been inspired by this week
Greg Mckeown is someone whose work I’ve discussed before, and this week I listened to a new podcast episode with him on The Tim Ferriss show.
It’s a pretty deep dive into some things which have been on my mind lately, and I took a lot from it.
“If you focus on what you have, you gain what you lack. If you focus on what you lack, you lose what you have” - Greg Mckeown
I’ve nearly finished Adam Grant’s new book - Think Again: The Power of Knowing What You Don’t Know.
I found this article in the Harvard Business Review - To Change the Way You Think, Change the Way You See - a complementary resource in an area of my life I’m continually trying to improve.
