London update and Sadiq Khan's property plans

publication date: Nov 10, 2016
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

London update and Sadiq Khan's property plans

Although London is often reported as ‘one market’, it really isn’t. From our analysis there are thousands of markets, just in Greater London, but we break this down for you into the 32 London boroughs, so click here if you just want to see how your own borough has performed.

Summary of London property price reports

So the property price indices show that the difference between the indices ‘average’ in London is so vast, it’s almost impossible to compare them. Having said that, Rightmove do their index differently, including a large range of properties’ prices, so the averages are probably somewhere between UK HPI and LSL ie around £500,000. What is interesting from Rightmove and LSL is that the latest data suggests that prices have definitely slowed, rising just 2.5% year on year, while the ‘older’ market data from HPI is showing growth of 12% similar to the last few years, but this is likely to reduce over the coming month.

Want to find out what's happening in your borough? Click here

Source: UK HPI

The top five growth areas year on year continue to be the outlying areas of London which prospered from around 2014/5, while zones 1 and 2 tended to do well earlier in the recession, with Kensington and Chelsea prices starting to rise after their credit crunch just nine months into the recession. So the five-year growth figure tends to apply more to inner London areas which are now, not surprisingly, hitting an affordability ceiling. This is of interest as we don’t know if the market has just run out of steam for a while or if these areas are genuinely being affected by Mortgage Market Review and also the restrictions of the amount lenders can lend which is 4.5x people’s salaries. These caps haven’t existed before and we are now going to really see if they have a permanent effect on slowing the London market. This shouldn’t be of a worry to anyone. Slower price growth after rapid increases following rapid falls is normal market behavior and let’s face it, Londoners could do with a bit of break whether they are existing homeowners or trying to get onto the ladder. It’s investors who are likely to be hit by less capital growth and higher taxes, but I doubt anyone is going to be worried about them!

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Most buyers are looking at 10-12% growth while new build prices reflect the high cost of land and premium nature of new builds
Although ‘older data’ from the HPI, this continues to show the vast difference between first-time buyers paying just over £400k for a property (albeit a lot of money, it is still an average, so some pay more, some less) while those who are already owners and have built up vast amounts of equity over the last few years can afford to pay a lot more – the difference being nearly 30% more to trade up. Interestingly, mortgaged properties aren’t that much more than first-time buyer purchases: about 12% more, suggesting many buying in the capital are actually buying for the first time. What is astonishing, though, is people buying, on average, a property for nearly £515,000 in cash. Personally I think I’d run off with that money and buy somewhere else… commuting in when required!

Buying for the first time? Read our FTB quick guide

The Rightmove data below shows that using ‘averages’ for London itself is really pointless; individual purchases by different groups in different boroughs is the only real way to gauge property prices in the London area.

Source: Rightmove HPI

London sales slowed substantially in the second half of 2016

Source: UK HPI

Source: Rightmove HPI

Prices have slowed, sales have slowed and the average time to sell has increased to 54 days. But as said earlier, this was all predicted and isn’t a problem for many as those who have just moved are unlikely to want to move again for some time, giving prices a few years to secure some gains, allowing people to move again. Meanwhile, if wages continue to grow in the capital, hopefully affordability will improve slightly.

Want to find out what's happening in your borough? Click here

Looking to sell sharpish? Read how to sell your home quickly.

Sadiq Khan introduces more plans for affordable housing and has a pop at his predecessor
The Mayor of London has announced a further two sites that Transport for London (TfL) will bring forward as part of his plan to fast-track public land in order to provide a greater number of affordable properties for residents of the capital.

The building of new homes in areas owned by TfL has been speeded up by Khan after land was identified with the potential for around 10,000 properties across 75 sites.

The Mayor said “It is unacceptable for sites to sit unused when our city is crying out for more housing.”

Two sites which have been announced recently are located at Landmark Court in Southwark and Fenwick South in Lambeth.

Fenwick South

  • Will have a community centre and 55 new homes, all of which will be social housing.

  • TfL is delivering the project on land owned by Lambeth council.

  • TfL will fast-track the site with work to begin in 2017.

Landmark Court

  • Walking distance to Borough Market and London Bridge station.

  • Potential for over 25,000 sqm of development.

  • Opportunity for commercial and retail ventures.

  • More than 100 homes with a minimum of 35% affordable.

  • TfL are aiming to have partner to develop the site in early 2017.

Both Fenwick South and Landmark Court form part of Khan's promise to bring forward TfL land for home building with a commitment that half of the properties across their portfolio will be affordable. This comes hot on the heels of the Mayor's announcement in the Summer that land owned by TfL in Greenwich, which had been ignored for the past eight years under Boris Johnson's mayorship, would be fast-tracked for development.

Looking at a new build development? Read our new build shared equity checklist.

Sadiq Khan said: “A chronic lack of affordable housing in our city has undeniably led to Londoners being priced out, with rents they can't afford and little hope of getting on the property ladder. We won't be able to fix this problem overnight, but I am determined to lead the way by building more new and genuinely affordable homes to rent and buy.

“That is why it is crucial we get on and start building affordable homes on the hundreds of sites owned by Transport for London that we know have been sat undeveloped for far too long. It is unacceptable for sites to sit unused when our city is crying out for more housing and these two sites are just the next step in fast-tracking public land to deliver homes for Londoners.”  

Old Oak Common

Another place mishandled by Boris Johnson (according to Khan), Old Oak Common, has recently been subject to review by the new Mayor. Following a review of the Old Oak and Park Royal Development Corporation (OPDC), Khan claimed that plans to regenerate the area in West London were left 'in a mess' by the Johnson administration.

Khan did give his backing for the regeneration, however, he emphasised the need for the Government to lessen the financial burden it will place on Londoners. He criticised Johnson for 'rushing headlong' into an agreement with Downing Street to transfer the land and claimed that poor terms had been agreed compared to similar schemes around the UK.

The Mayor announced a formal review of OPDC in early Summer with the intention of making sure that residents of London receive the best possible benefits from the regeneration opportunity.

Review findings:

  • The understanding between Boris Johnson and Downing Street which lead to OP DC taking ownership of public land was entered into too quickly

  • The terms were not favourable enough to Londoners.

  • Evidence suggests that more funding has been provided to other places on HS2 line.

  • Failures of the previous administration to find a relocation site or engineering solutions for the Crossrail Depot and maintenance facility means that valuable development land has been lost, land values have been depressed and the chance to create an attractive area has been thwarted.

Recommendations by Khan include:

  • Telling the government that he'll only agree to a land deal which is good for London, he thinks the current one may restrict the amount of affordable housing.

  • Continuing to make the case to government to provide financial support and devolve more fiscal powers to the Capital in order to keep up with the costs of infrastructure.

  • There should be talks with government to see if there are bits of land in the north of Old Oak that can be passed on to the Mayor early, ahead of the main deal being finalised, so development can be quickened up.

  • There needs to be a long-term plan for bringing forward a commercial centre at Old Oak South.

  • A Chair must be appointed to highlight the Mayor’s intent to bring forward development with residents and business being involved in the planning process.

  • Unnecessary costs and bureaucracy can be eliminated by bringing some OPCD functions under the umbrella of Khan's proposed Homes for Londoners organisation.

In the time since Khan first announced the review, the rate of development at Old Oak has increased and development to the north of the Grand Union canal has actually been quicker than anticipated:

  • Planning permission for the development was agreed in August for 605 new homes.
  • A target of 50% affordable housing has also been agreed with the developer, Genesis Housing Association and Queens Park Rangers Football Club

All this after the Mayor intervened to increase the level of affordable homes.

Worried about getting on the ladder? Read our new build shared equity checklist.

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