Blog Post No. 190
Rents Soar, House Prices Plunge, and the Enigma of ‘Ghost Listings’ – 12th Sept Property Bulletin
The cost of renting a room in London has reached a historic milestone, exceeding £1,000 ($1,246) per month for the first time.
This development underscores the growing scarcity of available rental properties, which has become another critical challenge in the UK economy. This also impacts the availability of workforce who can afford to live in the city.
According to data gathered by SpareRoom, a platform dedicated to matching individuals in search of roommates, the average monthly rent for a single room in the capital surged by 15% compared to the previous year, reaching £1,013 in August. This increase is twice the rate of inflation and a substantial 28% higher than the national average, which stands at £794.
This escalating trend in London’s rental prices has significant implications for residents and the overall economic landscape. As the housing crisis deepens, it highlights the pressing need for solutions to address the shortage of affordable rental properties in the city.
Precise Mortgages, a specialist lender within the OSB Group, has recently implemented several changes to its limited edition buy-to-let (BTL) range, aimed at assisting brokers in addressing affordability challenges for their customers.
The key updates include a reduction in rates for five-year fixed-term BTL mortgages, with the new rates starting at 5.24%.
Additionally, Precise Mortgages has lowered the minimum loan size for all limited edition buy-to-let products to £40,000. Furthermore, they have introduced a brand-new five-year fixed-rate product, which comes with a 7% fee.
Adrian Moloney, the Group Intermediary Director at OSB Group, expressed his enthusiasm for these changes, stating, “We’re delighted to be able to lower rates across our five-year fixed-rate mortgages within our limited edition buy-to-let range. With market challenges set to continue and strong rental demand remaining, landlord affordability is paramount. That’s why we’re able to assess five-year affordability at pay rate across loans for single dwelling, HMO, and multi-unit properties.” These adjustments are designed to provide greater flexibility and support for both brokers and customers in the dynamic BTL market.
House Prices Plunge at Fastest Rate Since 2009 – London Hit the Hardest
August 2023 witnessed a staggering 4.6 percent drop in house prices compared to the same month the previous year, marking the most significant decline since the notorious 2009 financial crisis.
New data from Halifax paints a grim picture for the UK’s housing market, as surging mortgage rates continue to heap woes upon it.
This figure plummeted from a mere -2.5 percent when contrasted with July, as an ongoing streak of interest rate hikes by the Bank of England sent buyer confidence spiraling downward.
Throughout the month, London experienced the most dramatic plunge in house prices in terms of cash value, plummeting by 4.1 percent to an average of £529,000, as sellers slashed their property prices in a bid to secure sales. Nevertheless, the capital city remains the most expensive place in the UK to purchase a home.
Despite mortgage rates slowly receding from their mid-summer peak, prospective buyers have remained apprehensive about committing to a home purchase.
Kim Kinnaird, Director at Halifax Mortgages, noted, “Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July.”
Kinnaird went on to express her anticipation of continued downward pressure on property prices through the end of this year and into the next, adding, “The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.”
The Surge of ‘Ghost Listings’ in recent times, a rise in ‘ghost listings’ has emerged as a response to sellers’ desire to avoid leaving an online footprint, especially when their properties face price reductions or struggle to find buyers.
This unconventional trend combines elements of both private and public property sales, offering a discreet alternative to traditional approaches.
Luxurious London residences have appeared on well-known online platforms, surprisingly labelled as “off market.” These ‘ghost listings’ typically lack essential details like images, floorplans, and even clear addresses. Despite their secretive nature, they are prominently featured on portals like Rightmove and Zoopla. But what motivates this intriguing shift in property sales?
Mark Wells, the CEO of Invisible Homes, a growing off-market property platform, believes that his platform serves a similar purpose to these ‘ghost listings.’ He explains that selling off-market preserves privacy and avoids negative online footprints when properties face price adjustments or challenges in finding buyers. However, platforms like Rightmove and Zoopla ensure access to a broader pool of potential buyers, prompting estate agents to strike a balance between the two approaches.
Much like ‘ghost listings,’ Invisible Homes has experienced a surge in popularity over the past year, reflecting the fluctuating nature of the housing market.
Becky Fatemi, the Managing Director at luxury estate agency Rokstone, cautions sellers to be discerning when selecting who to entrust with their property sales. She cites examples of conducting significant off-market sales for high-profile individuals while maintaining strict non-disclosure agreements and avoiding public advertising. Fatemi considers listing off-market properties on popular search sites as “futile,” emphasizing that high-net-worth individuals seek clear and concise property information.
Peter Wetherell, the founder of Mayfair-based agency Wetherell, believes that placing off-market properties on major portals presents an “oxymoron.” He argues that once inquiries are made and PDF details become available, the property is essentially on the market.
Nevertheless, the trend of ‘ghost listings’ continues to grow.
While the concept of ‘ghost listings’ continues to gain traction, opinions vary on their effectiveness in preserving privacy and attracting the right buyers.
The luxury home market in London has remained relatively stable, thanks to a significant portion of prime property transactions being cash-based. However, the broader market has slowed down, leading prime buyers to exercise caution, resulting in a 5.9% decrease in prime sales transactions in the second quarter.
For prospective buyers, there are areas in London that show promise with potential for future price growth. These neighbourhoods have seen undervalued property values coupled with increased buyer interest:
– Located on the north side of Hyde Park, Bayswater boasts classic Victorian-era white stucco architecture.
– Recent high-profile residential developments, including conversions of historical buildings like the Whiteley department store, have contributed to its growth.
– Median price per square foot in Bayswater in 2022 was just over £1,300, compared to nearly £1,800 in neighboring areas.
– The arrival of the Elizabeth Tube line at Paddington and a regeneration project on Queensway are expected to further boost the area.
– Chelsea is a charming neighborhood known for its King’s Road shopping street, cultural heritage, and green spaces.
– Over the past 15 to 20 years, Chelsea has been somewhat overshadowed by other prime areas but has shown steady growth.
– Despite economic challenges, Chelsea has seen a 2.2% increase in property values since March 2020.
– Increased interest from U.S. and Hong Kong buyers, drawn by favourable exchange rates, has contributed to Chelsea’s resurgence.
Pimlico and Westminster:
– These central London neighbourhoods offer properties at a significant discount compared to prime central London.
– The average price per square foot in Pimlico and Westminster in 2023 was £1,074, compared to £1,745 in the prime market.
– Property values in these areas have underperformed in the current cycle, falling more than 9% since 2015.
– Pimlico features 19th-century white stucco terraced houses, while Westminster has a mix of older period houses and new-build developments.
The price differentials between these neighbourhoods and their more expensive neighbours have surprised some experts, making them attractive options for value-conscious buyers. Demand for homes in Pimlico and Westminster is on the rise, making them areas to watch for future price growth.