Is Now the Right Time to Buy London Property?

November 19, 2020
London Is Now A Good Time To Buy

Is now the right time to buy in the London property market? This is a question I am asked regularly, so as a UK-based property agent who specialises in the London property market, I wanted to share a few pros and cons for buying during these turbulent times.

If you’re thinking about buying in the London property market, there’s so much noise out there, and you’re probably wondering “is this the right time to buy?” “should I sit tight” “should I wait” and “are things going to change”. Some of the main areas of thought are that if you buy at this time, is it too soon and will you overpay for the property. There are many things to consider, so let’s start with the pros of buying in London now.

Why now is a great time to buy London Property

It’s relatively a Buyer’s Market in London right now.

First up, just to give you a bit of context, it is still a relatively buyer’s market which means that as a buyer you probably have a bit more time relative to the amount of stock that’s out there to pick the right property for you. When it’s a seller’s market that means that there are too few properties for the number of buyers that are out there and therefore a lot of buyers are competing against each other and typically over bidding, sellers are overpricing, and buyers are paying more for the property than perhaps the original asking price. However, in a buyer’s market, as we are here in London right now, there are fewer buyers relative to the amount of stock and therefore buyers can really be more in the driver’s seat and it does typically mean that buyers are able to achieve purchase prices less than the asking price. It’s not to say that across London this is what’s happening, but we’re finding that we are able to achieve discounts from the asking price in today’s current market.

Fewer Overseas Investors

If you’re focused in prime central London, given that we are still in the middle of the pandemic, we’ve had significant travel restrictions and that means about 40% of the international buyers we normally see who are interacting and present in London are not here to buy so this is another reason why now might be a good time. With this decline in foreign investors, you’re competing with fewer buyers at this time. When we get a vaccine and we’re open again from a travel perspective, you’re definitely going to find more international buyers who have been locked out from the market for a while who are going to be ready to jump back in which could potentially start shooting property prices back up.

Stamp Duty Holiday Deadline

The next thing to consider is that we’re currently in a “stamp duty holiday” which means that the government enacted post the first lockdown a window in which you would save up to £15,000 on your stamp duty bill, depending on the price of the property you are looking to buy. The Stamp Duty Holiday is currently scheduled to expire on 31st of March 2021. I have created an article on the Stamp Duty Holiday that shares the way this may actually impact you and how that gets calculated but suffice it to say £15,000 is significant.

Now, given the cost of stamp duty and the property prices in prime central London it might not be the end of the world but certainly, for first-time buyers or those second steppers that £15,000 means that you can either save that money or you can use it towards your purchasing power to perhaps get more property for your budget.

Mortgage Interest Rates in the UK are at an all-time Low

Another pro to buying in London right now is that mortgage interest rates are still historically low compared to where they’ve been in the past. Below is a graph that shows average interest rates by product types since 2014. The 10-year fixed mortgage which is about the longest you can expect to get here in the UK is just under 2.5% where it was above 4% back in 2014.Tthe two-year fixed rate averages just about 1.5% today versus around 2.5% in 2014.

Graph Mortgage Rates 1
Graph from

This alone will save borrowers thousands of pounds over the long run by taking advantage of rates today and working to pay that mortgage down over the next number of years.

Consider Your Own Personal Situation

It’s not a con per se but I always recommend to my buyers that they need to make sure that regardless of mortgage rates or anything else you want to factor in your own personal situation and if you feel comfortable taking on a mortgage. For example, if you’re currently a renter and perhaps your job situation is not as secure as you’d like it to be, or you’re feeling you’re stretching just to take advantage of the stamp duty or interest rate situation, by all means don’t buy right now. You need to make sure you’re comfortable and that London is a place you want to stay; you want to know that your job situation feels relatively secure and if you had to go several months perhaps without income would you be in a position where you could cover that mortgage and not get into trouble? These are questions you need to ask yourself before investing at any time in a property. With these questions in mind, you can prepare by perhaps looking at different insurances or things like that to secure your financial future if the worst happens. I also advise that you prepare for everything that comes after you make an offer, such as speaking with a mortgage advisor so you’re comfortable on what that mortgage situation might look like if they’re taking on a mortgage.

Do Your Research on the Market

Once you know you feel ready and secure with making the move to buying a property, you will want to research the market, particularly if you are looking to buy in London, to understand that you’re not overpaying for the property. If you fall in love with something, and you’re ready to dive in, make sure that it still offers good value compared to the other units that are currently on the market.

As a buying agent, I like to make sure that once we look and compare properties we can really compare it on a price per square foot, amenities, location, the distance to the tube station, and all those things to get them comfortable to feel that when we make an offer we’re making an offer that they feel comfortable making. This should be a part of your market research plan, so you know what other properties are offering in your price bracket, and if the properties you are looking at are priced correctly, or if you can go in with a lower offer.

Low Currency Exchange Rates

Another pro to consider, especially as a foreign buyer, is that exchange rates are still relatively strong compared to the pound. Though the pound has rebounded significantly since its post-brexit lows, it is still relatively weak compared to where it’s been historically.

This 10-year graph shows the pound relative to the dollar and you can see that prior to 2006 £1 was easily worth £1.50, where currently the range has been around $1.30.

Currency Rates Us

For European buyers over the last 10 years, the pound has purchased a high of €1.44 but today is only around €1.114.

Currency Rates Europng

For those US dollar and euro-based buyers, the foreign exchange savings are significant. People focus so much on the purchase price and perhaps even interest rates, as they should, but that significant savings in the weak or the strength of your dollar in terms of its purchasing power can really more than offset any additional cost you have down the road which can be pretty significant. Now, again, the the pound could get weaker over the next few months, especially with brexit woes looming, or it could actually rebound and get stronger, so that makes it a great time to consider if now is the right time for you.

Why now is not a great time to buy London Property

Property Prices in London Could Decline Further

As far as the cons or reasons why you might want to hold off on purchasing your property currently, the top reason to perhaps hold off is that property prices could further decline next year, especially after the stamp duty holiday ends. However, no one knows for sure what’s actually going to take place in the future!

Take 2020 for example, we started off the year with the housing market starting to rebound as we’ve had the general election in December 2019 and then Covid hit which literally stopped the market. Then with lockdown we thought that the market might just kind of slowly start creeping up, but with the government incentive on the stamp duty holiday we just saw the property market practically explode, I know for me it’s been one of my best years even just in the last few months and many estate agents are experiencing the same thing, so we’re seeing pricing increases, good transaction volume, again not where it’s been historically but those rebounds were really quite unexpected, given that we are still in the middle of the pandemic. This year just goes to show that no one knows what the future can hold, and for those people trying to time the market and get to the bottom I always say “you only know it’s the bottom when it’s on its way back up and you’ve missed it”.

If you think property prices are going down, say another 10%, then I recommend that you factor that in to the offer you make, if you found the right property today, because you definitely don’t want to play cat and mouse trying to do too much timing to the market and miss some fantastic deals in the meantime.

The End of The Stamp Duty Holiday

Another thing to consider, if you think that the property prices might go down even more, is that current forecasts show the London property market prices rebounding and increasing from 15-20% over the next five years, and historically speaking, London property prices have increased on average 7% since 1980 so things do suggest that the London property market will continue to recover and rebound. This therefore means that, again, timing it to the market is a bit risky. Now, having said all that, property prices could come down in April and May as the stamp duty holiday expires and that’s if it expires, we don’t know for sure, it could get extended but if those people who missed out on that stamp duty savings in April and May is likely to definitely pull people out of the market and therefore those who are still buying in April and May should probably be able to command a price reduction to reflect the savings that they’ve missed out on. Again, no one knows, so don’t rush merely to take advantage of the stamp duty holiday, but also don’t not buy if you find the right property, because ultimately you should be able to get it for the value that you see in it.

Brexit Uncertainty

The other con to consider is Brexit uncertainty could further depress property prices. The current deadline to get an agreement with Europe expires on the 19th of November (today!) of course there could be an additional extension but so long as this is still much in the air it will continue to create uncertainty as buyers sit on the sidelines and try to figure out what’s going on, that will continue to press property prices and you should be in a position to take advantage of that.

So I hope this article has given you some of the pros as well as cons or things to consider if you’re thinking about buying today. Leave me a comment if you’re thinking about buying and let me know some of the concerns you might have about coming into the property market at this time.

Leave a Comment