Is the peak of London’s interest rates finally in sight?
The past few years have been turbulent ~ to say the very least. A global pandemic, war in Ukraine, a disastrous budget and a recession predicted to be on the way. It makes for grim reading ~ and has caused chaos within the property market.
From the desk of Charlie Gibson…
There’s a fair amount of doom and gloom hanging menacingly over the London market now. Uncertainty reigns and, with many people still hedging their bets, the question we get seem to get asked most are: How high will interest rates really go? And, when will they finally begin to fall?
The argument for rising inflation
As always in the property market, many agents will give you a different ~ if not entirely contradictory ~ opinion. There is, of course, the case for saying that with China abandoning its zero~Covid strategy in favour of renewed foreign travel, inflation rises may be spurred on by a new influx of Chinese visitors. Likewise, the ongoing war in Ukraine, may continue to dictate the banks/ response to inflation, with high energy costs no doubt continuing throughout 2023.
The argument for it falling
Despite all of the above, I’m sticking to my guns and saying that the peak of interest rates may finally be in sight. And here’s why: the price of wholesale energy and imported goods has already fallen. It will, of course, take time for the effect to be felt on consumer bills. Which is why the Bank of England are anticipating that an inflationary may only begin to be felt around the middle of the year. So, to some extent, this is a waiting game.
Crucially, the economy is already weak and, total mortgage borrowing fell 19% in January to £2.5bn, a further increase in inflation rates could well burst the housing bubble, which would be a disaster. Furthermore, if rates continue to rise, it will reduce companies’ appetites to take on more debt, creating a vicious cycle. Clearly, the economic situation has to be clearly managed (and sooner rather than later) because above all, we are heading for a recession and need to get the economy moving.
The ‘Mayfair Bubble’ survives
Last year, as the post~Covid world continued to return to normal and international clients made their way back to Mayfair, demand far outweighed supply and, as a result, rental values sky~rocketed. As we are now in March, I see demand and supply beginning to equalise and those who are not on fixed mortgages just about managing.
Yet, Mayfair, which has firmly overtaken Knightsbridge as ‘the place to be’, continues to exist in a unique bubble. Most of our clients I speak to did have fixed mortgages, borrowing at around 1.5%, so those who are worst off have a negative of 1.5% and those who are best off are able to live in Mayfair comfortably.
As we continue to see low supply and high~demand, prices for best~in~class apartments and houses are likely to withstand any further economic shockwaves the year might bring. Between October and December 2022, annual transactions in Mayfair were up 62.5%, albeit at an annual change in price achieved by -20.6%.
So, what next for Mayfair? To put it simply: vendors have gotten more realistic, the demand is there, and those who take their agent’s advice and price to sell will achieve the liquidity they desire. It’s what 7.9% of the Mayfair market is currently under offer ~ and why the bubble survives.
Record sales for Carlos Place
A case in point is Flats 1 and 10 at Carlos Place, widely regarded as the finest portered building in Mayfair. Located between Grosvenor Square and Mount Street, with Green Park, St. James Park and Hyde Park all a walk away, Flat 10 features a interiors by Candy London throughout the 3 bed, 2 bath space totalling 1,809 sqft. As the penthouse, 2,261 sqft Flat 1 features 3 bedrooms and one of the only private roof terraces on Mount Street. In the last month, they sold for £8,750,000 and £10,500, 000, making them record sales for Mayfair. Get in touch today.
From London to abroad
It’s no secret that January holiday bookings were up. The newfound freedom to be found in a post~Covid world, along with a general desire to escape the gloomy UK headlines and even gloomier weather, means sunshine getaways are already uppermost in many people’s thoughts.
In one week, our luxury Escapes holidays booking totalled more than £30K; a great indicator that summer 2023 will be the year that sets the precedent for stress~free, flexible travel. Even better, there seems to be a ray of sunshine as the international airline body has forecasted a dip in global air fares this year. My advice, our exceptional villas are already almost booked up. So, for an outstanding holiday with a difference, there’s no time like the present. Get in touch now.
