Being intrinsically involved in the residential property market we are always keeping an ear to the press and market commentary as to house price growth and market sentiment. One cannot help feeling that the press overly dramatise the results of various house price indices, and play on our emotions as a nation of homeowners and aspiring homeowners.
There are a couple of indicators, and market sentiment would seem to back this up, that prove that the London market, and particularly Prime Central London is cooling. Fair enough, this is a market that has seen 4 years of uninterrupted growth of about 40%.
The story in London though is very different to the rest of the UK.
Outside London, where we and the majority of our clients operate, a modicum of reality is needed. House prices outside London are still 16% below their 2007 peak and have only just started to recover to the levels they hit nearly 10 years ago. In terms of average prices (excluding London) the average price is only £133,000.
This is not a house price bubble, but a period of consolidation in the market, which many agree was needed. Furthermore, we all know what supposedly happens after periods of consolidation, another cycle of growth may appear.
IF prices were to rise a not unattractive 16% over the next 3 years then it would have been a flat market as a whole for 10 years from 2007-2017. We believe this is a realistic scenario. Of course, returns to landlords are further boosted by rental income which if one averages c 6% per annum net, makes for an extremely attractive total return.
It will be an interesting time in the property market, but here in the East Midlands we believe talk of a crash or bust is overblown and long term returns from good quality residential investment properties will be as, if not more, attractive than many other asset classes.