2017 was a strong year in many ways for the London real estate market. A year ago, the city posted its best results for January ever. As the new mortgage regulations took effect at the start of 2018, however, London’s sales figures settled back down to slightly below normal.
This January, 400 homes were sold in the London region. This was a decline of 28.8% year-over-year compared to 2017. However, it is important to realize that this is only slightly below the ten-year average for the month. Last year’s sales figures were monumentally higher than anything else seen during the last decade. While 2018 may be off to a slow start, it should definitely be viewed as a regression to the mean rather than a catastrophic collapse.
Limited Selection Limiting Sales
The new mortgage regulations are certainly not the only factor directly affecting the sales numbers in the London market. Also impacting these figures is the number of listings available for prospective buyers to choose from. Only 623 homes were listed for sale in January, leaving the city with a total of 1,020 homes available for sale at the end of the month.
Both of these figures represent massive drop-offs compared to 2017. There were 31.8% fewer new homes listed for sale in January of 2018 compared to the previous year. Similarly, the total number of homes for sale at the end of the month was down 27.7% year-over-year. This tight restriction may mean that buyers are unable to find the homes that fit their needs, and are waiting until the right option comes on the market.
Prices Climbing under Supply Restrictions
When supply is as limited as it currently is in London, it should be no surprise to see prices on the march. The January average sale price landed at $333,424. This was up a total of 9.8% compared to 2017. Prices were climbing the fastest in the more affordable London East neighborhood. There, the new average price of $294,348 actually climbed by 32.1% compared to 2017.
With lower-priced homes quickly increasing in value, it is clear that limited supply is having an effect on the London real estate market. However, it is also important to remember that due to the mortgage stress test stipulations that came into effect at the start of the year, buyers who may have been targeting the most affordable homes in the area may no longer be able to qualify for a mortgage. This could be a factor in the apparent increase of the average sale price of homes in the London area.
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