London Property Prices

2019 predictions from Jeremy McGivern




WHAT WILL HAPPEN TO LONDON PROPERTY PRICES IN 2019?

Making predictions is a fool’s errand. One should really look at probabilities.

But today, I will be your fool.

The first thing that I should point out is that transaction levels will likely remain suppressed until some agreement over Brexit has been reached. What has received little focus is the fact that the large fall in transaction levels is actually completely normal as they always fall in times of political uncertainty.

Historically, London is always affected far more than the rest of the country in election years where the result is unclear. For example, in the run up to the election in 2014 transaction numbers fell 30% in London but only c. 15% for the rest of the UK.

Unfortunately, we have effectively had a vote of sorts in every year since then except 2015:

  • 2016 = The Brexit referendum
  • 2017 = Theresa May’s General Election
  • 2018 = Meaningful Vote on the Brexit Deal (postponed!)


During this time the price falls have been low compared to the drop in transaction numbers (as I predicted on CNBC in 2016) and until this monotonous politicking stops you can expect transaction levels to remain well below the norm.

If Brexit is resolved there may be a slight increase in prices in general but what will happen is that transaction numbers will dramatically increase, so this will benefit the share prices of the estate agents and house builders, which have been battered.

Why will prices not increase dramatically?

Well the prices for best in breed properties will probably see quite a strong increase as by definition there are very few of these and although buyers will still remain somewhat cautious, they will pay premiums for the best, especially as there will be more competition (remember that this is not a re-run of 2008. There are huge sums of money sitting idle on the side lines waiting to be deployed).

Meanwhile, there will be a lot more supply of run of the mill properties as sellers see the market improve and decide to sell - prices for these properties will improve but only by a modest amount as the increase in supply is likely to match the increase in the number of buyers.

Of course, this is all dependent on the political situation. If there is a second referendum nothing will happen for at least 6 months as this is how long it will take to organise it. In which case, don’t expect much to change.

Meanwhile, “no deal” will not be the apocalyptic catastrophe that many predict – soldiers on the streets, no food in the shops, no cheap holidays on the Costa del Sol... honestly, you would have thought we were going to war.

But, catastrophizing and hyperbole are what sell newspapers and political ideas. The reality will be somewhat different and although “no deal” will undoubtedly cause issues for some, it will also create opportunities for others – most likely those who own dollars be they US, HK or Singaporean dollars.

The simple fact is that there is more money in the world now than ever before and London is still the most attractive city in the world for wealthy individuals.  As a lady from Turkey who is hoping to acquire a £12m apartment recently said to me:

“Brexit is not political turbulence. Guns and tanks on the streets are serious.” She is not the first to point this out to me…

Although it may seem like it right now, we do not have a monopoly on political incompetence. Fortunately, we do have legal and political systems which limit the damage that politicians can cause.

And as aggravating as the political shenanigans undoubtedly are, most jurisdictions in the world would love to have the luxury or even ability of meaningful democratic debate. We should not forget how lucky we are and how attractive this makes London to the rest of the world.

I leave you with two quotations to ponder: 

“Government is not the solution to the problem. Government is the problem.”
Ronald Reagan

“Economies don’t grow, they evolve. The dictionary defines growth as an increase in quantity or size. If an economy were to literally grow, it would have more or bigger companies hiring more of the same kinds of workers and producing more of the same goods and services. 

"Evolution, in contrast, is a process of continuous change, leading to a higher, more complex and better state. Capitalist economies evolve, and their evolution is endogenous, arising spontaneously from the ingredients of the capitalist economic system. 

"The competition to innovate (so as to gain market share or simply survive) pushes living standards forever onward and upward like a perpetual-motion machine. Moreover, there is no reason to believe that progress will slow over time; indeed, it may even speed up as new technologies spill over into other areas, making whole new industries possible or economically feasible.

"Technology spillovers — unintended consequences — are the alchemy of the capitalist macroeconomic system. Doom-saying in the capitalist economy is a losing proposition.”
Joseph Schumpeter
 
Jeremy McGivern
Founder of Mercury Homesearch
Jeremy can be contacted at jeremy@mercuryhomesearch.com or 02034578855

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