Commencing in late 2005 London saw almost two years of double digit house price growth. However the mainstream market started to cool mid/ late 2007.Unusually it was not market sentiment or a weak economy that initially triggered this latest slowdown but moreover the onset of the credit squeeze which restricted interbank lending and in turn finance to the public and business. This contraction in the availability of money together with a tightening of lending conditions has resulted in a shortage of funds in the main stream market. Combined with this has been the more recent impact of inflationary pressures on the high street which has prevented a reduction in interest rates and this has weakened demand for property in the mortgage dependant sub million pound market.

Average prices in prime central London are currently circa £1000 per square foot and are expected to have fallen by about 5% by the end of 2008.In the context of the recent gains this fall is comparatively little. By contrast the super prime cash rich £5m plus market remains reasonably buoyant and in exceptional cases prices of up to £4000 per square foot have recently been achieved.

Whatever the detailed reasons for the overall slowdown, most people would say this was long overdue and is simply a result of market forces at play bringing balance back into the market. However perhaps the most profound characteristic of this most recent situation is the speed with which sentiment changed from what was a sellers to a buyer’s market. The resultant change from plus 25% pa growth in some central London locations last year, to negative or static growth at present represents the fastest change on record. This is surely due in part to the increasingly abundant and rapid exchange of information made possible these days by technology.

There is no doubt that as always in history the mainstream London market will return to positive growth but how soon that will occur is largely dependent on the robustness of the economy, the direction of interest rates, and the desire in the coming months for lenders to attract new business We anticipate that improving fundamentals will allow the current weaknesses in the market to start to evaporate during early to mid 2009. Looking beyond that we are in no doubt that when market sentiment improves there will be an equally rapid and positive recovery in prices.

Meantime every cloud has a silver lining and it is our opinion that the remainder of 2008 and the start of 2009 will be remembered in future as a period of exceptional opportunity for investors and first time buyers with funds to enter the market. There is a better supply of quality property than has been seen in a long time and motivated sellers are keen to negotiate. That said there are still many more compromised properties where buyers are asking unrealistically high prices.

Now more than ever is the time to seek professional advice, source only the best properties for sale, capitalise on opportunities to negotiate, and ensure your purchase is considered and achieves an optimum result.

Renting – London

During the last 2 years rental growth in London has been increasing after a few years of stagnation. 2007 saw rents increase on average by just over 10% and in the mid range market a typical 2 bedroom flat for example will cost £500 - £600 per week.

There is evidence that some property owners who initially intended to sell but failed to achieve their desired price are now holding and renting their assets instead. In the short term this should increase the supply of rental properties and start to minimise any further rental growth.