London Property Market — Price Slide Continues — Oct 2023
The London property market continues to cool as we move into October, with prices declining and sales volumes slowing down.
According to the local real estate board, the benchmark house price has dropped for three consecutive months, and the median house price has fallen nearly $50,000 since May.
House purchase activity peaked in May this year. In August and September, purchases underperformed the previous three years. Demand has collapsed.
As a result, listings are sitting on the market longer, and at the current rate of purchases, it would take roughly four months to clear out all the active listings. Last Spring, the clearance rate was approximately two months.
For the first time in years, there are over 4,000 properties listed for sale in London.
Condo apartment prices have begun to drop. Purchase and inventory conditions are similar to those for houses.
Why is home price growth stalling in London?
There are several factors contributing to the cooling of the London property market.
Mortgage Rates: Rising interest rates are making it more expensive to borrow money, which is reducing buyer demand.
Increasing Inventory: Another factor contributing to the cooling market is the accumulating number of homes for sale. While three months of supply is not high, it is the highest the market has seen since 2019. This supply increase gives buyers more options and reduces the heat in bidding wars.
Faltering Consumer Sentiment: Consumer sentiment tends to reinforce existing trends. It’s like an amplifier. While confidence in real estate was rising in the first half of 2023, it has now stalled. If a sustained downward price trend emerges, confidence is likely to tumble. Byers with low confidence in price appreciation often delay their purchases and compound the weakness in the market.
Reports earlier in 2023 were hopeful for a recovery after the double-digit price drops in 2022. However, the recent trends suggest that the market is cooling down again. Home sellers in London and St. Thomas should be prepared to negotiate.
Here are some other things to keep in mind about the London property market:
The market cooling down is broad, impacting all property types. Speculative investment appears to have shifted from Ontario to Calgary.
The rental market is still strong, with rents continuing to rise. This could be cyclical — due to potential first-time homebuyers delaying their exit from the rental market. When mortgage rates fall, and buyers re-enter the market, rents could fall sometime in late 2024 or 2025.
Overall, the London property market is showing signs of cooling down. However, it is still a seller's market, and buyers should be prepared to face competitive conditions.
