Property prices in Docklands and the City will drop by five per cent over the first half of 2008 as buyers and investors feel the effects of restricted loan terms imposed by lenders according to specialist London agent Hurford Salvi Carr which covers the West End, City and Docklands. In its half yearly report, Hurford Salvi Carr outlines how prices have dropped by three per cent in the last four months of 2007 and that this trend looks set to continue through the first six months of 2008 leading to a total drop of eight per cent between September 2007 and June 2008.
Director of Hurford Salvi Carr, David Salvi comments: “We predict the sales market will be slow during the first three months of 2008 with little stock being put to the market as vendors wait to see what happens to prices. However, this drop in property prices follows an explosion in prices of 46 per cent since the start of 2005. An eight per cent reduction in the 10 months leading up to June 2008 would take prices back to the level there were at the start of 2007.
Hurford Salvi Carr attributes the drop in property prices to a number of factors. Both the Docklands and the City rely heavily on investors and this market has been seriously affected by the change in lending criteria of banks and building societies in reaction to the recent Northern Rock crisis.
David Salvi states: “Some investors who purchased off plan apartments in 2005 and 2006 will find themselves unable to complete contracts at the time of practical completion due to the lack of competitive funding options. We expect to see some investors attempting to sell contracts on prior to completion.”
However, in contrast to the falling sales market, Hurford Salvi Carr reports in the review that rents are likely to increase by 6 per cent in 2008 continuing the annual rate of growth experienced in the second half of 2007.
David Salvi said: “Although the rental market is not immune from the effects of the credit squeeze, it is not primarily dependent on loan finance and credit terms and is typically counter cyclical to the sales market. The rental market is more dependent on rate of growth in the economy and employment as well as the supply of rental property in local markets.
He added: “The supply of rental units will continue to expand in 2008 especially from property developers who decide rent before selling in hopefully a better market in 2009. We expect that demand will continue to exceed supply in the rental market.” |