The real estate market, like the economy as a whole, is developing cyclically, and its cycles are determined by periodic fluctuations in the leading indicators of business activity caused by the imbalance of supply and demand. The real estate market is particularly prone to cyclicality since often supply does not keep pace with the rapidly changing demand.
The property cycle consists of four main stages: expansion, oversaturation, recession, and recovery. A specific dynamic of prices characterizes each stage, the number of transactions, and the volume of construction. Therefore, a potential investor needs to identify what is the country’s market cycle phase to wisely choose the ideal moment for buying or selling real estate.
When considering purchasing real estate abroad, firstly, it is necessary to understand the current state of the property market of the selected country. Secondly, it is essential to determine what is the long-term perspective and evaluate how long the property will retain liquidity and whether the price will increase over time.
The best time to buy real estate is the beginning of the recovery phase when prices reach their minimum, and further growth is expected. Accordingly, the best time to sell is the end of the expansion period or the early start of the glut phase.
The UK's real estate market forecast for the near future
According to KPMG accountants, property prices in the UK next year could drop by 6.2% if the country leaves the EU without an agreement by October 31, 2019. However, if the deal is signed, KPMG predicts that prices will rise by 1.3%.
London is likely to see a drop in property prices nonetheless. In the case of the "tough" option, a sharper price fall is possible in the upcoming months. However, the low supply of new housing stocks may strengthen prices over time.
Market Analysis – Summer 2019
In May 2019 the seasonally adjusted average house price in London was £456,810 (ONS), 4.3% lower than in May 2018.
London had the lowest annual growth of any region in the UK in the year to May 2019. Prices in Inner London have been falling since January 2018, but the speed of decline slowed in the second quarter of 2019.
Outer London price growth dipped into negative territory in May 2018, for the first time since 2011, and the speed of decline appears to be increasing. The annual house price change in Outer London in May 2019 was at the lowest level recorded since October 2009.
In March 2019 the median monthly rent in London was £1,495, compared to £695 in England as a whole (VOA). Private rents in London on average rose by 0.9% in nominal terms in the year to June 2019 (ONS).
However, London’s rental growth rate was still among the lowest of any region in Great Britain, second only to the North East. Across England, private rents increased by 1.3% on average in nominal terms.
The Political Outlook
Despite positive signs, the market is likely to remain sensitive as political maneuvers continue during the next few months.
Much is still unknown about what the new prime minister will mean for the Brexit deal, the economy and, crucially, any changes to tax policy. Boris Johnson has already raised the possibility of changes to stamp duty as a means of freeing up the housing market.
For some sellers, this may seem like a reason to delay the sale of their property, in the hope that it spurs an increase in demand. But a decision to do so will be weighed against the risks associated with possible no-deal Brexit or, in more extreme circumstances, tax changes in the event of a change of government.
We believe that it will be a challenge for any unprofessional property investor to attempt analyzing the real estate market in the UK successfully in the current market environment. Therefore, we advise you to take the proven route and eliminate any chance of inaccuracy. UK Property Advisors specialists have extensive experience in researching, analyzing, and assisting investors from all over the world. Over the years, we have come in direct contact with a vast network of respectable developers. We will gladly help you to accurately interpret the state of the London’s real estate market and advise you on the most profitable action plan according to your circumstances.
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