South London house prices stagnating/slowing

[strappyshoe]

So for a long time I have thought London prices were separated from reality, eg a bog standard terrace in not a great area with average schools costing close to 1m & wondered if there would be a tipping point. Was visiting parents on the weekend and noticed one of those flyers advertising a recent sale. Now this is a highly desirable area with a fairly insulated target market but the price was not that different to what it would have been some years ago which if calculating inflation would be a loss. And this was a prized house on a prized street.

Have family & in-laws in other parts of S London and have noticed a lot of property particularly at the top end sitting on the market and looking still overpriced.

Is it because of lack of equity in recent years making it hard to make the traditional move from a flat that's gone up in value to a house. Plus renovation costs? Is it the high costs of borrowing? stamp
duty? Hybrid working & huge fee increases for private school pushing families from inner London to Outer London. Do people just want more for their money?

I remember reading a theory that when "boomers" start to die there would be a glut of expensive property (family homes) for a sale at a similar time which would devalue prices because there were not enough buyers. I didn't think it sounded right but now am not sure.

I plan to move in the next few years but because of stamp duty it will be the last move. I'm also toying with moving to one z4 instead of where I am.

No-one can afford the prices - it’s that simple!

Wages in the generations under the boomers can’t support prices at this level. And there is nowhere for the economy to go right now - no boom on the horizon. Why do you think prices won’t fall when the boomers start to sell up? Who’s going to buy them?

No-one can afford the prices - it’s that simple!

I suppose I was thinking no one could afford them before but prices still went up. Maybe a lot is down to stagnant flat prices & lack of equity.

Wages in the generations under the boomers can’t support prices at this level. And there is nowhere for the economy to go right now - no boom on the horizon.

I agree with that, we never actually recovered from 08.

Why do you think prices won’t fall when the boomers start to sell up? Who’s going to buy them?

Well now I think that does look a possibility.

I also questioned if some people had a change in mindset eg the reason I'm looking at z4 is because I can get more space for more money & that is important to me now. I also want more disposable income because bills & food prices are so high now & I don't see that changing.

Just me then 😆

Maybe we have reached a tipping point, but you only know that in hindsight!
I do think that we will reach a tipping point, if we haven't already, and not too far in the future. House prices have been held up in a lot of parts of London and SE because many people buying in these areas have wealthy parents/ grandparents who give them 6 figure deposits to buy or they are sold to middle aged/older buyers who first bought decades ago and can afford to upsize or they are sold to wealthy foreigners. Apart from that, higher earners in eg law, finance, tech type jobs have benefitted from high wage growth in their industries so have been able to take on very large mortgages. Up to now, it's tended to be those lower down the income ladder whose wages have stagnated/ gone down in real terms.
All these things may be changing now or soon, with an economic downturn, high inflation in the last few years, meaning that most people's budgets are more squeezed, etc, foreigners appear to be investing in the UK less for various reasons. The point you make about ageing/dying boomers leading to a glut of family homes on the market putting downwards pressure on prices is correct imo. Millennials definitely can't afford them en masse and also tend to have smaller families or no children. So an increase in supply and a reduced demand. Pretty sure that tends to cause falling prices! Of course, it won't happen overnight but gradually over the next few years/ couple of decades even.

@rainingsnoring yes we had help to get on the ladder (from equity in gps house).

Exactly. I think the figures are at least 50% of FTB receive ££ from their families. I don't know this for a fact but I suspect that the percentages are a lot higher in London and SE and the amounts far greater too.
This might change in house prices go downwards, budgets are more squeezed because of higher COL, and if the stock market falls a lot. It's fallen a bit very recently but may well go up again short term. Longer term, I think we are in for large falls. If people are or even fell less wealthy, they spend less and I think that will probably include giving money to their children and grandchildren.

Transaction levels have dropped dramatically from the 2014 to 2021 period (although part of peak in 2020 /21 was the temporary nil rate band widening). They seem to be bobbing along just over 50k p.a currently, similar to 2008 to 2012 levels despite larger population. Will see what happens when people start needing to move. Have often wondered who will end up living in our parents homes - none of my similarly aged friends and colleagues can afford to buy them unless had significant help, but can't see us being able to do that for our kids unless wages go up dramatically!!

@Pange79 that's interesting re transaction levels.

I couldn't afford my parent's house.

Stamp duty goes up by a lot after £1.5m. There was an article in The Times saying that already done up family houses near good schools under £1.5m go quickly. But it's slower over that price, especially for renovation projects.

I'm seeing a lot on the market for 1-1.2m just sitting there but to be fair they aren't always near great secondaries (appreciate great means different things).

Watch what they do - not what they say. Look at the world's greatest investor - Warren Buffet. He has been building a huge cash position ready for what he thinks comes next. He did the same in 2006 way before The Big Short begins.

Regarding housing, he thinks that lower cost housing used as homes will be well insulated from shocks, especially where the owners can sit out "a crash" and just keep working. On the other hand, higher cost housing used as investments are prime for hits.

This was quite an interesting short YT video on this:

Had our house in London on the market last year. Thought we'd sell really quickly but we didn't and had to reduce, so I've chewed the cud a lot about the reasons why. I think a lot of what you suggest rings true.

We have a house in a desirable area - very close to transport, amenities, nightlife, good schools etc. A couple of things struck me. Down the road in zone 4, you can get houses with bigger gardens, off street parking, garages that are also close to stations. They don't have quite the same array of bars and restaurants, but they have enough amenities. If you are starting a family and only need to go to the office a couple of times a week, more space is appealing and you might be willing to forego the trendy coffee shops and gastropubs that 10 years ago were de rigueur.

Secondly, I think people are looking for properties that are already done up. It used to be that it was a good idea to leave something for the next buyers to do. That way they could see a way to add value. Now, however, the cost of renovations is so high that the chances of getting a ROI is much reduced. And that's if you have the spare cash to do the work and can find the tradespeople to do it. Most houses though are not show homes and do need some work. So they have to be priced very sensibly now to be worth it.

Stamp duty is a further consideration. Where previously, people might have worked their way up the chain moving every 5 years, now they are more likely to stay far longer. So they will go straight for the bigger house further out rather than buying a flat, then a terrace, then a detached for example. It's just too expensive to keep moving.

We are moving to another very desirable area of the country. It's an area where a lot of property on the market is owned by older downsizers. Many of the properties need a lot of tlc and clearly haven't been done up since the 90s. They are sitting on the market because people probably can't bear the thought of what will be involved in renovating them. Also, the older people selling them don't seem to want to reduce the price and don't seem in a rush to sell. We've seen houses around the £900K mark sitting on the market for a year with barely any reduction. So I hear you about the potential glut of properties due to downsizing, but I think there's still a stubborness regarding reductions.

@Gekko21 it's interesting to hear some real life experience.

Down the road in zone 4, you can get houses with bigger gardens, off street parking, garages that are also close to stations

This is exactly what is drawing me to some of the areas I've been looking at in z4. I grew up in a fairly big house with garage/off street parking minutes from a high street/transport & it makes life very easy. Further in I just don't have the budget for that access & the houses are often not big or with parking. Now I could get more for my money further out but I want that high street & station minutes away. z4 seems to have some sweet spots with bigger houses closer to amenities but the high streets are definitely less buzzy/cool but with dc I don't have so much time for that.

Agree re stamp duty, we have gone the traditional route of flat, terrace but I have younger colleagues who are skipping the flat stage & going straight for a house further out. Which makes sense to me in this climate.

The houses I have been looking at sound similar, large family homes that haven't been updated in years & do need some significant ££££ but definitely stubbornness re reducing.

Good luck with your move!

@XVGN I have some money with BH & googled what WB has been up too, intriguing.

I fucked up not selling my Tesla shares a few months though!

'Also, the older people selling them don't seem to want to reduce the price and don't seem in a rush to sell. We've seen houses around the £900K mark sitting on the market for a year with barely any reduction. So I hear you about the potential glut of properties due to downsizing, but I think there's still a stubborness regarding reductions.'

I agree with @Gekko21 and you,@strappyshoe about many older sellers and their stubbornness/ delusions wrt pricing. I've seen so many properties like this over the last 3 years. They list at a price far above what the market will realistically pay, then spend the next 3 years coming on and off the market with small reductions, often listing with different agents. These houses just aren't selling because only someone very foolish would want to pay the sort of figures that are being asked. Eventually, most of these sellers will likely be forced to capitulate, although it may take some kind of economic catalyst.

@strappyshoe I do wonder whether those currently less cool high streets will become cool as younger people start to migrate to them. After all, when I moved into my current area 20 years ago, it wasn't so cool then. It was just affordable. Now it has better transport links and more cool stuff. I expect the Zone 4 places will follow suit. As you say, there are some sweet spots that are not quite suburbia but haven't quite reached their potential as urban hubs.

In my part of south London, it isn’t like this. We’ve got people coming from other parts of London pushing house prices up. I think people seem to be able to afford up to around £1.2m but that anything more expensive than that is staying on the market for longer. The area I’m in comprises very very large Victorian houses (which are in the £1.8-2m region) and then the smaller terraces that are around £1.1-1.2m.

In our neighbouring very popular part of London, houses are slightly smaller but the postcode is slightly more trendy and everything seems to be going for just under £1m. The market is dead - in respect of property coming on - which is probably why things go so quickly if they do come on.

Basically, East Londoners who are sizing up are pushing prices up and up!

Are you South east @kirinm?

We’ve actually made an offer on a full on renovation job which is in a terrible state. The vendor has let the house rot but has obviously been told their house is worth over a million because our offer (which starts with a 9), just isn’t enough for them. But we are the only people who’ve even seen it because its condition is so off putting. I blame the estate agents here because they’re obviously said - based on square footage you’ll get £1.1m - but when you need to spend at least £100k just to make it liveable (and mortgageable) then you’re not getting that sort of money and the estate agent has given them false hope. We will walk away soon and then they’ll have no offers at all! No developer is going to buy it because the ability to make a quick profit just isn’t there.

I think that there are a number of factors at play. I live pretty centrally in an area known to be family friendly (but with a market that can afford private schooling so state schools are not that good) that has large family houses, decent gardens and fantastic transport links. Properties here are still selling but the buyers are the top end of British earners/inheritors - the type who got priced out of Notting Hill/Chelsea etc 40 years ago. There's also a trend of downsizing boomers simply buying a new property and handing the family home over to the DC to house share which reduces the supply. Just for context.

What isn't selling are the conversion flats. IMO there are 2 strands to this - first there are lots and lots of new flats being put up in new "desirable zones" eg Battersea and Embassy Quarter. There are also a lot of private sale flats being built to finance redevelopment of social housing blocks. So the market for flats is flooded. Secondly a lot of buyers with the cash for a flat here can skip that stage for a house further out - as OP is thinking. However that does mean that the vendors of flats can't sell them to move up the chain. Commercial purchasers often prefer a newbuild as the maintenance is likely to be less than a conversion.

Yeah, Zone 2. Our area is admittedly pretty small so options are limited but it’s like we’ve been discovered by other parts of London in the last few years and the whole area has gone crazy price wise.

and lots of new flats being put up in new "desirable zones" eg Battersea and Embassy Quarter.

The scale of development here is insane, so many flats.

I think our area must be a bit of an anomaly because the only flats around here are conversions and our flat sold quickly. But flats are cheaper here than they are 5 minutes up the road when the postcode changes. The difference in cost between flat and house is monumental and it’s very hard to make the jump.

Your best property market summary will always be the monthly RIC's UK Residential Property Market survey.

https://www.rics.org/content/dam/ricsglobal/documents/market-surveys/uk-residential-market-survey/2_WEB_February_2025_RICS_UK_Residential_Market_Survey_tp.pdf

"At the headline level, the new buyer enquiries
series posted a net balance reading of -14%
in February. This is down from a figure of -1%
previously and marks the weakest result for the
survey’s gauge of buyer demand since November
2023. That said, trends will have been influenced,
to some degree at least, by time running out for
any new enquiries to be completed ahead of the
reduction in stamp duty thresholds coming into
affect at the start of April.
Similarly, the newly agreed sales indicator moved
into negative territory over the month, registering
a net balance reading of -13% compared to
+2% beforehand (at the national level). As
such, this represents the softest return for the
sales measure since May of last year. When
disaggregated, respondents across London
reported a particularly noticeable dip in the
volume of sales agreed in February."

It's always worth reading some of the anecdotes at the end of the report.

A friend is selling in Brockley, she is looking for an extra 200k vs what she paid 4/5 yrs ago as that would keep pace with inflation. She hasn't had much interest but lots at that price point & she hasn't got the swanky large kitchen.