Is the capital's property market starting to mature at long last?

 
Is the capital's property market starting to mature at long last?

If someone was to tell you that the rate of growth in the property market - in terms of price - was starting to slow down, you'd probably see that as something of a negative, especially on the back of the last 12 months we've had in the property sector. During the past year, prices have risen by around ten per cent as demand has soared and more and more people have taken advantage of an improved financial situation to get themselves onto the property ladder.

However, if you cast your mind back over the last few months, you might have seen some experts in London start to worry about how the market was performing. Reports show that prices are starting to hit levels that are at the very top of what people can afford, and with around ten people on the search for every property that went up for sale, demand has yet to show any sign of letting up. 

This has caused concerns among some people that a property bubble could become a reality in London once again, with prices reaching a point of unaffordability and eventually crashing. So the news that price rises are starting to slow down without actually dropping are good for the market at the current time. 

So what are the experts saying at the moment?

According to Zoopla, the trend of slowing price rises that we're seeing at the moment is indicative of the fact we will not be seeing a property bubble in London, with the company stating that current prices are far more sustainable in the long term than we would need to see to be worried.

“Talk of a bubble is premature because it implies that people are acting in a way that doesn’t make sense and that prices are unsustainable,” said Alex Chesterman, the group’s chief executive.

“You have to look at London in a slightly different light. It’s a market that has finite supply and enormous demand that has driven prices to a level that makes London very expensive but that doesn’t necessarily mean it is not sustainable. Bubble is a word that implies it is about to burst. I wouldn’t say that’s the case."

Over at Rightmove, the belief is that the prices across the city are now starting to reach the levels that are pushing what people can afford to pay. 

Its sentiment comes at a time when the Office for National Statistics has reported that the average cost of buying in the capital rose by a spectacular level of 18.7 per cent, and Rightmove said that this will be the last time we see considerable increases for some time as the market becomes more sensible and starts to mature rather than spiral out of control.

Miles Shipside, director of Rightmove, said of the London market: "Some sellers will be looking to cash in and possibly get a lot more house for their money further out, but they may have missed the peak in the rush to realise their gains as parts of London appear to have hit the upper limit price buffer."

Recognising when this buffer has been reached will be a strength for the market, as although it will mean that investors do not see their homes appreciating in value as quickly as they may have been for the past few years, the chances of them losing - as many did in the aftermath of 2008's crash, will be far lower.

Brian Murphy, head of lending at Mortgage Advice Bureau, said he expects to see the trend for a more relaxed market without intense rises continue throughout the rest of this year, adding that there is little need for the government to intervene, because the sustainable marketplace of the moment lends itself to stability, and it is likely it will be able to handle itself.

"The full impact of MMR is still yet to be seen, so knee-jerk decisions by the government to restrict house prices could well shoot recovery in the foot," he said.

"The focus instead should lie on building new houses, as a chronic shortage of supply will seriously restrict consumers’ ability to fulfil their homeowning ambitions if not addressed soon."

Dr Alla Koblyakova, an expert in mortgage finance from Nottingham Trent University, had a similar sentiment, and said that the quickly rising prices were a good thing, so long as they now start to level off.

"What we’re seeing here is the first signs of a meaningful outcome from the recession and the only current threat to the market is the potential new Government policy which would artificially stop natural financial development," she said.

"We are not seeing the effects of a bubble here. These price increases are mostly driven by better economic conditions, increases in investment and better lending conditions. There’s a positive correlation between house prices and current GDP growth. We’re seeing positive signs from the market."