Fitzrovia Property Market – What is really happening? (Easter 2015)

I had an interesting conversation with a local Fitzrovia accountant the other day. He is quite an observant chap (I know this because I have known him for a few years .. but I suppose you have to be to be an accountant!). He knew property values had increased in the area, but wasn’t sure by how much. He also thought the number of properties for sale in Fitzrovia (and more importantly ones with sold slips on them)  had slightly decreased over the last couple of years.

The rate of house price inflation in Fitzrovia continues to slow with growth of 11.2% in the 12 months to February 2015 compared to annual growth of 19.2% just over six months ago, according to the latest Land Registry data. However, there is considerable local variation in our part of London, with annual house price growth (up to Feb 15) ranging from 7.8% in Ken and Chelsea to 14.4% in Camden over the last 12 months.

Fitzrovia has seen property values rise by 29.2% in the last two year, on the other side of the coin though, Fitzrovia has seen a slight reduction in the number of properties sold throughout 2014 as base line demand for housing tempers. The 5.2% drop in property transactions in Fitzrovia in 2014, compared to 2013, indicates a tempering of house market in Fitzrovia as affordability and tightening yields start to kick in.

When you compare London with the rest of the UK, you could be looking at two different countries. In London, its mid/late teens house price to earnings ratios are impacting demand (ie the average property value is often 15 or 17 times the average wage in London .. in fact in Fitzrovia, the ratio is in the early 30’s to 1).  However, prices have remained strong because the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the rest of UK, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook. This is good news as other areas catch up with London, the UK property market will be more in balance as a whole across the Country.

It might be interesting to note though, the number of Fitzrovia property sales in 2014 are still 30.8% lower than the level seen in 2007 (when property values were rising at an impressive 21.36% per annum), so depending on a positive outcome on the General Election, the ongoing housing recovery is far from stalled. In fact I believe the market will become focused on the middle to higher value areas (such as Fitzrovia) where households have equity and find it easier to access mortgage finance.