What is the forecast for the London property market?

Property prices in London are expected to drop in the new year and some experts have predicted as much as a ten per cent decrease over two years. The slump is due to increased borrowing costs and recent rises in inflation. Homeowners in London and the south east of England are understood to be worst affected by the move because they generally carry more debt due to higher living costs. Property buyers there experience the largest gap between income and home prices, typically needing to borrow a larger sum in relation to their income. They also tend to put down a more sizable deposit in order to secure the home of their dreams and enjoy a lower mortgage rate.

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How are mortgages affecting the market?

Higher mortgage rates mean the market is stalling and London property owners are being warned that house prices will drop faster in the city than in other areas of the country. Mortgage rates plunged to a record low in 2020, however, since then, they have begun to rise in response to inflation. First-time buyers trying to get onto the property ladder are faced with high borrowing rates but this is softened by the hope that property prices will drop, giving them a cushion. The average two-year fixed mortgage is around 6 to 6.5 per cent.

Is there still movement in the market?

Buying a home now may be advantageous, and could well be worth it in the long run, provided that the monthly mortgage payments are affordable. The market is by no means stagnant. There are movers and first-time buyers out there. Those on the move will wish to take advantage of the best conveyancing solicitors in London. There are many professionals who can undertake the work for you, such as Sam Conveyancing.

Will demand continue in the housing market?

Many workers continue to work from home one or more days a week, so there is still a market for larger homes with a modern home office space. As long as this hybrid working model continues, so will demand for suitable properties. However, higher interest rates and monthly mortgage payments, coupled with the current cost-of-living crisis mean a difficult and unpredictable market. This year has seen a reasonably buoyant housing market as buyers seek to secure those locked-in low-rate fixed deals. Lockdowns, too, showed just how valued green areas are, increasing the demand for interest in homes in rural and coastal regions, according to ONS statistics. However, moving forward, according to The Standard, the next house price drop could be as much as ten per cent. It’s estimated that even by 2027, property prices will not have fully recovered and will remain around 1.5 per cent below present levels.

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What about first-time buyers?

Another positive is that prospective home buyers can now save cash on tax thanks to the cut in stamp duty. Some first-time buyers may be postponing plans to get onto the property ladder until mortgage rates drop or the market is more stable, with property prices improving. They may anticipate another housing crash, which means their risk of moving into negative equity, especially those with smaller deposits, is greater. Others, however, are making the move now to ensure they aren’t left worse off.