It is well known that looking to live in London can be an expensive experience. It isn’t a surprise really that some buyers would hedge their bets and wait to see if the prices will come down. The problem with this, of course, is that this can have a negative effect on the market.
Independent estate agents James Pendleton have put together a report looking at the London market, and have found that the negative effect of overvaluation has had. It appears that first time buyers would rather wait to see prices drop rather than rush to buy an expensive flat.
Looking at the effect this has on the market, it appears that there has been a collapse in sales of 47% in just a year. In the last few years, the falling number of sales have gone from 4,709 in July 2016 to 2,494 in July 2017. This is a noticeable drop that could show that trouble is looming.
The report by James Pendleton also showed that other types of property also saw a fall in sales. These falls weren’t as severe as the ones seen in flat sales though. Detached properties went down 5%, semi-detached fell by 1% and terraced houses went down 8%.
Those hoping this would result in a lower price may be disappointed. During the time flat prices went up 2%, terraces 3%, semi-detached went up 13% and detached by 41%. What this points to is a discrepancy between sales and prices, meaning that a correction is needed to avert any problems in the property sales market.
What is interesting though when looking at first time buyers is that they are borrowing more. These buyers in London borrowed 8% more in the second quarter of 2017 compared to last year. What the report also showed was that first time buyers in the lower end of the market struggled to be able to afford a property at all. This situation may be improved with the government’s Help to Buy scheme.
When looking at the results of the report, it shows that there is an obvious reluctance to pay for the overpriced properties that are available to first time buyers. This means that we may see a reduction in price in the future, though when this will happen isn’t easy to predict. If sales are low, it is obvious that something needs to be done to get the market moving.
With the government making speeches about the problems for first time buyers, it is obvious that the problems in the property market, especially in London, is being noticed. Now may be time to take action, which is something the Help to Buy scheme may be doing. Hopefully, the scheme can live up to its name and will help first time buyers get onto the property ladder, and be able to afford a well-priced home.