Stanley Property London

Patrick's Property Politics

Rates of Interest in London - It’s Not a Horror Show

Wednesday 19th July 2023

By Patrick Bullick

What effect have recent interest rate hikes had on the interest in London property?

There are always a surprising number of ‘immature’ buyers when the media is hysterically trying to talk down the property market to scare everybody.

This is a typical conversation…

Buyer- ‘I am looking for distressed sales.

Me- ‘What distressed sales? ’

Buyer- ‘Interest rates are rising so prices are dropping.’

Me- ‘Not in Central London in our experience.’

This is a daily conversation and it becomes tedious.

In the rest of the UK, prices are indeed dropping as a result of increased borrowing costs but London is different - as ever !

According to the OECD, in 2010 36% of UK property owners had mortgages. Apparently, in 2020 that was 28%. Quite a drop in 10 years. I suspect the proportion of pure cash ownership in Central London is greater than in the rest of the country – where possibly 80% are wholly owned.

Add into the mix the notable statistic that the number of people on variable rate mortgages has come down from 70% in 2011 to 10% now. I am not sure this proportion carries through to our landlord clients, quite a few of whom are still, to my surprise, on floating rates.

However, it does mean the vast majority of the 20% of property owners in Central London with mortgages are on fixed rate loans. Many may not yet be feeling the effect of the Bank of England base rate increases. These fixed rate loans don’t all end on the same date so if/when they do cause ‘distress’, the sellers will only come to market gradually.

Rates may well come down before current fixed rates deals expire, so the pinch may not be in line with antici………

pation.

With thanks to Tim Curry in The Rocky Horror Picture Show? If you haven’t seen it – you haven’t lived!

Few owners are coming to the market unless they have good reason. Consequently, supply is thin and prices are largely being sustained.

Mature buyers recognise this and on seeing a property they want will simply buy it.

Some private landlords with mortgages are bailing because their borrowing rates have effectively tripled.

This tripling would not be the end of the world if it were not for the crass removal, by (Gordon) Osborne, of the ability of private landlords (only) to offset the interest on their loans against income for tax purposes. Paying loan interest out of net income for a landlord who has already been taxed at 40% or 45% on their earnings is untenable. It means they are making a loss and subsidising tenants.

Most of our landlords inclining to sell have done so already - or are in the process. We do have a few up our sleeve so email me if interested patrick@stanleypropertylondon.co.uk

If sensibly priced, we can sell these ex-rental properties pretty effectively.

It is always tricky to get the best price with tenants in place. Investor buyers tend to be looking for a 5% + yield and despite significant rent increases, yields are not running at 5% in Central London.

It is always easier to get the best price for a property with Vacant Possession (VP).

Landlords who are staying in the letting market are getting much better returns and most private landlords remaining are now 100% cash owners, so see no reason to sell.

They would also be subject to a punitive 28% CGT rate, thanks to a parting gift from the aforementioned (Gordon) Osborne as he was being kicked out of Theresa May’s Cabinet.

Where else would a landlord put the money anyway?!

With a Labour Govt. looming few want to invest in businesses, so many stay in property. It brings to mind that old Victorian adage ‘Safe as Houses’.

Our recent experience is, there is still interest in Central London from sophisticated buyers who can be married to sensible sellers despite higher interest rates.

Few signs of distress.

Until next time.

PB

Sign up for market updates

Other articles you might enjoy

Just A Minute: Right Turn
Just A Minute: I Give Up
'C' How You Like It MPs?
Just A Minute: Cleverly Done?
Just A Minute: Consecutive Conveyancing
Bad Budgets & Behaviour
Just A Minute: Rachel Reeves Rumours
Just A Minute: Councils Building Council Houses
Communism and the Civil Service
Just A Minute: A View from the Fish Tank
Just A Minute - Landlords leaving under Labour
Market Trends and Tax Challenges
Just A Minute - PB's Plea to S'Kier
Is PWT APT for the UK?
Just A Minute - LonRes Lowdown
Goving, Going, Gone.
Just A Minute: Foreign Investment Fury
Savvy Supermarkets
Just A Minute - Forever Home
To Sell or Not to Sell? That is the Question.
Will the Scottish Shambles lead to a Labour Landslide?
Just A Minute - Property Taxes Under Labour
Vested Interests Strangling UK Property
Just A Minute: Non-Dom Taxes & London
I'm not my usual furious self. Why?
Just A Minute - ONS Statistics Seasonal, Surely?
Budget Leaves Landlords Bereft
Short-Let Sh*t Show
Just A Minute - Short Let Shambles
Easy Access In Old Age
Share All The Sh*t
Just A Minute - Renters Revenge Bill
Stop Buggering-up Brexit. Drop taxes and Build, Build, Build.
Are We Missing A Trick?
Just A Minute - Interest Rates Shocker?!
Happy Christmas - Enjoy Election Year!
Tories Trash 2023
KC3 & the Right to be Free
Just A Minute - Inflammatory Interest Rates
Best ways to make money from London property
Steer clear of S’Keir?
Just A Minute - AirBnb and long lettings
Is it Smart To Invest in Repossessions?
It isn’t just Parties & Prostitutes
Banks take Tenants to the Dark Ages
UK House Prices - August Review
Death, Divorce, Downsizing & Now Debt
Just A Minute - Pitfalls of the Politically-Exposed...
Rates of Interest in London - It’s Not a Horror Show
The Sharks are Circling
Why AI!
Just A Minute - Stamp Duty Is Silly Money
Tenants in Double Trouble
Just A Minute - Renters Revenge Bill
Farmers Forked by Skier?
Renters Revenge Bill
Just A Minute - 100% Mortgages
A Clear Steer from Skier (Starmer)?
To Inherit or Be Gifted ...that's the question!
Just A Minute - Questionable Question Time
KC3 and the Winds of Change
Doom and Gloom - Get me a Broom…
Just A Minute - Spring Budget
Rising Rents and our Muppety Mayor
Help to Buy - Time to Die
An Englishman’s Home is his Castle
Ignore the lot of them and Grind ourselves to Growth!
What new Hunts-Trick can we expect in the Budget?
Housing is a Step Up the Ladder
Are We All Scots Now?
Fill a Field vs Brand New Towns
Happy Christmas in Troubling Times
ER ll
Too old to 'Rock & Roll' but too young to die.
Strangle The Supply, Throttle The Treasury
Jeremiah was a Bullfrog (Joy to the World)
Modern Mini-Manifesto
Patrick's BBC Wake Up Call
Rishi Rides to the Rescue
Pension ‘Professionals’ cause Property Problems
Conservative (Ms) Communication & Catastrophising Keynesians
Even The Rich Benefit From Equity Release
School Schedules Suck
Perils of Predicting Politics and Property...
Ride the Wave of the Short-Let Sh*t-Show
Sushi or Sashimi - or the Vampire Squid that is HM Treasury?
Short Sadiq & Silly Lets - Sorry, wrong way around perhaps?
Tory Tw*ts & their Terrible Taxes
Where's The Get Up and Gove?
Tony Blair: An old warmonger with ideas
Lovely Jubbly Jubilee!
Far from falling – Central London flat prices may be about to take off.
I do feel rather old...
To Landlord or Not to Landlord? That is the question.
The impact of rising gas prices and Russian sanctions on the central London property market
Contrary Views & Bullshit
School gate Skills Scandal
1st quarter 2022 prime central London market analysis
Does Rishi Sunak's statement promote Spring growth?
Air-Source Heat Pumps - Hot Air for London
London Property Market. Less a Laundromat - more an Airing-Cupboard
Childish Chelsea Chanting
As interest rates rise, the rental investor still wins
ONS predict UK population growth plateau. Is it a demographic time bomb or a tax-easing gift horse?
No gains – No tax. Typical Treasury Twittery
Arrange a free market appraisal of your property

Send us your details and we’ll give you a call to arrange a convenient time to appraise your property:

Your details

Thank you for your request.
We’ll be in touch soon to arrange your market appraisal.

Thank you for your request.
We’ll be in touch soon to confirm your appointment.

Thanks for submitting

Share this article
Sign Up For Market Updates