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Historically, one of the safest and most predictable property markets in the world has been in the UK. Yes, they have had their 10 – 15 year ‘boom and bust’ cycle like many other countries, however their ‘bust’ is not usually so dramatic. The stability of the UK property market revolves around the strong British desire to own their homes and the ongoing problem of a shortage of supply relative to the population.
It is no secret that the property market in the UK has suffered as a result of the effects of the global credit crunch, and the knock on consumer confidence due to negative media reports throughout 2008. In particular, the prime London market has recorded falls of between 20% - 25%. These drops are making London properties more affordable than they have been for some years, and are now proving to be a very attractive proposition to euro and dollar-rich buyers from overseas.
Hence, since the beginning of this year, the first signs of improvement are being noted. Estate agents in Greater London and the Home Counties have recorded a substantial increase in activity with viewing and enquiry levels up almost 60% on January 2008. Even higher levels are being reported in Central London and the Halifax price index shows that UK average house price rose by 1.9% in January 2009. This was the first rise recorded for nearly a year.
Simon Bance, associate director with Dubai Luxury Homes, and who also owns a real estate agency in the UK, confirms this view. Our UK business saw more new buyers registering for prime property in January, than the total for the last six months of 2008. It is the first signs that the market is approaching its base and I feel that we will probably see prices level off by around April, giving buyers a three to six month window of opportunity to catch the market and buy at the bottom before prices start to rise again.
Meanwhile, demand from foreign buyers has also grown significantly compared to the same period 12 months ago, especially from the Middle East. The fall in the value of sterling against the euro, dollar and linked United Arab Emirates dirham has meant foreign buyers can now enter the UK market at a fraction of what it would have cost them only months ago.
A home in the UK that was worth 3m at the end of 2007 is now worth around 2.4m a fall of 20% over the year. To overseas buyers that same home was worth $6.1m in December 2007, but now could be bought for just over $3m representing an approximate 50% total decline in price.
Simon adds, This is the perfect time for overseas buyers and UK expats to purchase a property in the UK. Not only are prices approaching their bottom, saving up to 20% on the same time last year, but they are also benefitting from a further saving of around 30% on the current exchange rates. These opportunities arent just focused on the luxury end of the market, but are represented in all price sectors.
From an investment point of view, developments of new homes that are already complete or approaching completion provide an ideal opportunity where developers are keen to offer deals and release cash for their next projects. Rental demand is still strong although it is important to choose the right area to buy, in order to ensure the best rental yields. It should also be noted that newly constructed properties are generally easier to let out and maintain.
Of course there is the view that falling prices may yet have some way to go, but many overseas investors believe that the Euro could soon begin to depreciate against the pound. Consequently, this will push European buyers into buying sooner rather than later creating higher demand and more competition for good quality property, hence the small window of opportunity, with interest likely to become more intense towards the Spring.