Is Camden’s new ‘hot spot’ status reliable?

Barclays has just named Camden as one of the most sought-after property hot spots in Greater London. They predict prices to rise by more than 1/3 over the next 4 years – but with the housing market so volatile, are predictions set more than a few months in the future reliable anymore?

Camden, along with Three Rivers, Richmond upon Thames and St Albans, has been tapped as one of the four most important ‘property investment hotspots’ by Barclay’s UK property Predictor. They say that property prices in these areas – already well into the ‘investment’ class of properties – will rise by more than 30% over the next 5 years. Compared to the less than 12% predicted for London as a whole, or the UK average predicted at just over 6%, that is a dramatic difference.

The thing is, these figures are based on hope – literally. They assume that the behaviour of the emerging class of younger (in fact, Millennial) HNWI landlords will continue to drive the market forward in these few hot spots. What little data we have on these moneyed millennials suggests that they are more eager to buy, and more driven by faith in continued market growth, than are older generations of London property investors. Optimistic investors often make a volatile market even more unstable.

And the market is volatile, across the country. That 6% figure quoted earlier is already considered to represent ‘soaring’ housing prices. If so many young, eager wielders of inherited wealth focus on a few ‘hotspots’ promising too-good-to-be-true returns, driving prices to unsustainable heights, how will a collapse in just one or 2 of these London El Dorados affect the investment market as a whole?

Worse, there is evidence that these predictions of market growth for all are already unravelling. Housing vendors across the UK are being forced to sell homes at much less than their expected prices, and the election really still has to be considered ‘too close to call’.

On the other hand, the lenders behind much of London’s property markets have been bracing for market setbacks ever since Brexit was first being floated. Most loans are much more heavily offset with equity than they were at the time of the last big crash. Many see a small reset as inevitable, so are working to make sure that the fall is a short and gentle one.

So, in the end, be wary about ‘hotspots’, and promises of 30% returns on your investment in 5 years. Some of us can afford to spend millions on a long shot (lucky them), but most of us need more certainty than that.