London Property Market - 2009 and the Year Ahead

Chard has been approached by a leading journalist to give our predictions for 2010. Here's what we think.

Chard has had its best ever year in terms of revenue. Much of this was a result of increased lettings business which compensated for the fall off in sales revenue for Q1 and Q2. The upturn in sales in Q3 has tipped the scales in our favour.

I'm always reminded of Douglas Adam's when asked to give predictions - "Arthur no more knows his destiny than a tea leaf knows of the history of the East India Company", but we do know the factors most likely to affect the market and their probable consequences.

Lettings - if the City continues its upwards march towards profitability I expect corporate lettings to recover. We've seen a few more senior lawyers and bankers renting with larger budgets - always a good sign.

The market over 600 per week and demand for property with the "wow factor" that wooed bankers before should therefore continue to recover. As should the market for family sized properties. The lettings growth in 2009 has been confined mainly to smaller, affordable properties to rent near the tube. Larger properties have proven a tougher gambit - and it's mainly the arrival of professional sharers, unable to find studios and one bed flats that agree with them under 300 per week, who have taken up the slack for these larger flats and houses to rent in London. Three lawyers renting in South Kensington with 750 - 900 per week between them have found three/four bedroom apartments make a lot more sense than virtual "student digs" at 250 - 300 per week.

A stronger city means more jobs for lawyers, accountants, IT professionals, restaurant workers - practically everyone. The prospect of draconian, EU led regulation should scare the living hell out of anyone with a stake in the London economy, whether they are a home-owner, business owner or employee, in case these jobs evaporate and move to Frankfurt, Singapore, New York, Hong Kong....

Continued growth in demand for more affordable property to rent depends on several factors. Restricted access to mortgage finance means erstwhile FTBs are renting (or living with mum), uncertainty over sustainability of house prices (and any uncertainty) means "treading water renting" is a safer option rather than risk negative equity, in a deteriorating labour market mobility is an issue and renting is the preferred option - and lastly onerous stamp duty costs (which have not kept pace with house price inflation for ten years) can mean throwing half a year's salary at the Exchequer for many first time buyers.

So the answer to what will happen to rental demand over the next year is in the hands of the wider economy. I don't expect any help or positive commitment from the government to get the sales market moving, so the buy to let investors who have been busy buying up smaller flats over the last six months look like they're onto a good thing.

The sales market has picked up remarkably over the last quarter. This is due to a combination of low interest rates - buyers with straightforward circumstances and large deposits have taken advantage of the drop in values. Investors with cash have been busy too (where else to put the money with 0.5% BoE rates?) and overseas buyers with Euros, Singapore Dollars, HKD and USDs have taken advantage of the devalued pound as well as lower house prices to buy at a 30-50% discounts on the 2006/7 euro and dollar cost. Simultaneously the City hasn't crumbled. If there's not an air of confidence there's not the thinly veiled panic that gripped the market in 2008.

The wider UK economy is looking less certain and a devalued pound should contribute further to making London (i.e the City and its related financial services sector) a good value location to do business. This should safeguard values and contribute to increased turnover in the London property market in 2010.

Sadly, the 50% proposed tax rate is nothing more than a two fingered salute to one of the UK's largest wealth producing industries from a government that is stepping into its gilded lifeboat leaving a badly holed ship behind. Repealing this must the the first priority of the next government. Worryingly we've sold several larger ex-local authority properties at a premium in the last weeks - to landlords looking to rent to what they describe as the "bottom of the market" and securing yields of around 13%. Perhaps investors are already smelling the coffee.

The fear is that in its dying gasps the present government may concentrate on a populist and damaging agenda to score political points. In which case the prospects for 2010 are rather different.