The selling price of houses in London traditionally drops slightly in August of each year; news reports over the weekend show that the drop of 6% may herald good news for people looking to purchase property in the city. Stricter lending criteria, more legislation around mortgage lending rules and the speculation of an interest rate hike, may mean though, that the annual “cooling off” off prices in the real estate market are more significant than recent years.
Will lowered house prices have an impact on the rental market in London? Can you expect to pay less for a property in London or will the sharper than usual decrease in house selling prices mean that you may pay more?
Firstly, it’s important to understand that just because house prices drop, doesn’t mean that more people are opting for purchasing a property in London. The new mortgage criteria announced in April meant that many people considering purchasing property were carefully considering their financial options and opting to stay renters for a while longer.
Secondly, the rental market is decidedly separate and distinct from the property purchase markets in London and often, demand outstrips supply, driving the cost of rental properties up sharply. At the end of July an article in The Independent pointed to the fact that prices in the rental market in London has risen steeply directly due to the lack of confidence that many buyers have in the purchase markets. Rental prices rose by 11.2% this year which is in sharp comparison to the ‘slump’ in house buying prices.
The proverbial housing bubble (oft talked about in London property and financial circles) has more to do with consumer confidence than you might expect. With the added restrictions and conditions attached to a mortgage application, many people in Greater London are opting to rent rather than step onto the housing ladder and this factor, more than anything, has been the driving force behind record rents.
You have to do your due diligence when looking at properties to rent in London. For people moving to the UK from overseas, this means you need to start the process well in advance of your arrival date. Another factor that affects rental prices is that renters often agree to the asking price, simply to secure the property: London properties move very fast – it can literally be hours from when the property is first advertised to a signed rental agreement. You need to give yourself some time to examine all of your options and look at a spread of properties before you make a decision about your new home.