As property prices in London’s most prominent postcodes are continuing to soar, some analysts predict it is a bubble ready to pop, while others insist the rising prices are sustainable.
Knight Frank, a renowned estate agency, began 2018 by predicting that home prices in London’s most coveted districts would not rise in 2018, largely due to a two-percent increase in the stamp duty on home purchases over £2 million.
The firm has recently revised its initial forecast from zero to six percent, stating, “In spite of record prices, viewings are up 15 percent compared to 2012.”
The continued rise in home prices only builds upon already huge gains for this prime slice of the London housing market, commonly called “Prime Central London” and comprising the chic areas of Knightsbridge, Kensington, Chelsea, Belgravia, and Regents Park. Prices in these neighbourhoods are 60 percent higher than they were in March 2009.
The housing market in the rest of the UK has either remained flat or fallen during the same period of time, creating a vast divide between the soaring values in central London and other areas of Britain.
“PCL prices are expected to increase by a further 26pc in sterling terms between 2018 and 2018 but at a much slower rate for international buyers,” said Liam Bailey, a Knight Frank researcher. According to Bailey, those who buy in US dollars will only witness a price increase of 15 percent over the same period of time, due to a strengthening dollar against the pound.
However, arguments are also being made that the market is overheating and may soon bust.
The think tank Fathom Consulting believes many factors determining rising prices are starting to diminish. These factors include panic caused by the banking and Eurozone crises, both of which led to the purchase of property assets in cities like New York and London.
In a recently published report warning of overvalued PCL properties and a possible 20 percent market correction, Fathom Consulting stated, “Over the past 12 months, fears that the euro is on the brink of collapse have faded dramatically.”
There are other factors at play also. The stamp duty increase on high-value properties may still deter buyers going forward, as could policies limiting foreign ownership of properties in London and elsewhere around the UK.
In June, Simon Hughes, a Liberal Democrat MP, called for changes to the law “so that housing in London can only be bought by people or companies resident in the UK.”