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Jon Neale is a director of residential research at Jones Lang LaSalle


Property myths and received wisdom


Jon Neale examines the polarity of the property market. T


he property market is full of myths that become received wisdom. One of the


most popular current ones – and one circulated widely in the press – is that the country is cleanly divided between a thriving London and a depressed rest of the country. It is not diffi cult to fi nd London


boroughs where prices have fallen over the past year: from Newham in the East to Hounslow in the West. In much of Outer London, buyers are few and far between, even in pleasant suburban areas. Much of the ‘boom’ in the


capital is in fact driven by a handful of Central London areas, where international investment is important – although, to be fair, much of Inner London, including rapidly gentrifying areas such as Hackney and Southwark, is also faring relatively well, driven by the capital’s still buoyant employment levels. Indeed, one of the more


interesting trends is the fact that some towns in the wider South East – say Brighton or St Albans – are actually seeing more robust markets than much of Outer London. Meanwhile, those ready to


write off anywhere north of Potter’s Bar might be surprised by how well the market is performing in Harrogate, Solihull, or parts of Cheshire, where both


sales rates and price rises over the past year put many a London Borough to shame. Up until 2007, prices of houses


of diff erent types and in adjacent areas tended to move together. Of course, booms generally spread from London to the South East and then beyond, but generally within those areas there was not a huge variation in the price gains from one property to another, even if they were of diff erent sizes or types. Now, however, the market has become far more polarised.


importantly, they are more able to pass on some of their wealth to their children so they can get a foot on the local housing ladder. With mortgage providers more


cautious over income multiples and evidence of paid employment, residents in such locations probably have more chance of qualifying for a loan. While it is easy to characterise the housing market as being split between the North and the South, or London and the Rest, it is a more a case of it being divided between ‘the haves and


those who have wealth.” “The market is with


The underlying reason for these changes lies within the mortgage market; with fi nance diffi cult, expensive or downright impossible for those without at least 25 per cent equity or an equivalent deposit, the market has moved to those who already have wealth. This is already apparent in the


Land Registry statistics; the share of sales in the most affl uent districts – those dominated by the highest social grades – has risen sharply since the fi nancial crisis.


This is not that surprising –


people in such areas are more likely to have signifi cant savings, or have enough equity in their existing properties; equally


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the have nots’, or rather the areas in which they live. So the apparent out


performance of the South is really just a result of more of those areas being in that part of the country. Affl uent, middle class parts of the North are just as likely to be doing well in the current market. With mortgages in short


supply, this is likely to continue. The divide may even grow with time; if fi rst time buyers have to save more for a deposit, they are more likely to manage it in locations where average wages are higher and particularly if they get help from the Bank of Mum and Dad. The exception to this rule is, of


2 August London Property Connection, londonproperty connection.com


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course, the part of the capital that upmarket agents like to call ‘prime central London’. Here, the market – at least the more glamorous parts of it – is driven by international equity and is more tied in to trends in the global economy, not least the concentration and internationalisation of wealth. Moreover, for better or for


worse, real estate in our capital, with our reputation for political stability and property rights, is seen as a ‘safe haven’ in these uncertain times. Nevertheless, the belief that


foreigners dominate the London property market, or that their infl uence is massively strong, is also something of a myth. The numbers involved is really very small, even in value terms (although obviously individual purchases can be mind boggling). The number of sales in the


very top price brackets each year barely scrapes into three fi gures, and even when added together is a fraction of a per cent of the housing market in the capital. And even here, rich British buyers are still almost half of the market (depending on who you talk to). The real story is, still, the


remarkable resilience of Inner London and some other more affl uent parts of the country. This will continue to present challenges to those working in more mundane areas.


TheComment


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