Is London Housing Market Overvalued?

Friday, April 22, 2022

We know property prices in London are high. With so much demand for homes in the capital, it would be strange if people weren’t willing to pay over the market value.

However, a recent study suggests values in the UK housing market are overvalued by 20%, and in London, the overvaluation might be as much as 50%, according to S&P Global Ratings.

Will London house prices fall?

Alastair Bigley, a researcher for the agency, &P Global Ratings spoke about the market, and he believes property prices will fall. Alastair said; “A combination of low rates, the stamp duty holiday and excess savings amid the pandemic have driven property prices higher, particularly in London and the South East where overvaluation relative to income over the long-term is as much as 50 per cent. We expect a greater correction in property prices in an overvalued market.”

It is not as though sharp property prices is just an issue in the United Kingdom, the same analysts found that it has been a concern across Europe in recent times.

However, anyone looking at the above information, and hoping it will lead to a fall in house prices might be disappointed.

Reallymoving believe annual price growth will rise to 11.9% in May 2022. They have analysed conveyancing quote submissions, and say the average price of property across the country will reach £352,984 this spring. This will be a record level.

Rob Houghton, chief executive of Reallymoving, said; “Last month we saw some early signs that the market may be beginning to slow but the latest data shows prices rising sharply in May based on activity in February, suggesting that for now the housing market will continue to defy expectations. We’re seeing a clash of post-pandemic driven buyer demand and a cost-of-living crisis which is only now really beginning to bite, and as yet it remains a seller’s market and the supply-demand imbalance is continuing to push up prices.”

There are also calls for other changes in the housing market

It might be that political pressure starts to impact the housing market soon. The stamp duty holiday changes affected the market in a considerable manner, and a prominent figure is looking for more changes.

Jonathan Rolande, from the National Association of Property Buyers, is calling for an increase in stamp duty for second homes.

He said: “Firstly I’d like to see Rishi Sunak increase the second property Stamp Duty. This will help suppress BTL/second home market etc. Additionally, we’d benefit from seeing an Increase overseas buyer stamp from 2% to 3% for first property increasing to 4% for subsequent homes. I’d all back handing landlords tax relief on insulating materials for let property – it is a scandal that tenants must live in cold, expensive to heat homes that they are unable to insulate themselves. We should also cancel 5% VAT for insulation.”

Contact Stones Residential for all your Belsize Park property needs in 2022

If you would like to arrange an appointment to help you negotiate the local housing market, please contact Stones Residential today by calling us on 020 7483 0685 or emailing belsizepark@stonesresidential.co.uk.