Prices are expected to jump by eight per cent next year, and 23.9 per cent over five years, as overseas buyers return to London and city centre living comes back into favour post-pandemic.
This could add a cool £116,000 the value of a home in Kensington & Chelsea, where the current average price stands at £1.45 million.
Despite this kind of seven-figure price tag Savills believes that savvy buyers are acutely aware that that after the global financial crisis, a series of stamp duty increases, and the uncertainties caused by Brexit and the pandemic, prices in London’s most prestigious postcodes are currently 20 per cent below the levels seen during the last peak, in 2014.
“The prime central London market continues to offer good value for money, in a historical context, and is expected to benefit in the medium term from an increase in overseas demand as international travel picks up,” said Lucian Cook, head of residential research at Savills.
“They will join the UK buyers who have begun to act on the opportunity, which has already seen values bottom out.”
Meanwhile estate agent Strutt & Parker has released its own house price forecast for 2022. It anticipates that prices in prime central London will grow by between five and ten per cent during the year, and by up to 35 per cent over the next five years. In the year to September 2021 prices inched up 1.2 per cent.
Beyond prime central London prices in “prime outer London” — affluent suburbs like Chiswick and Putney – will also outperform over the next few year according to Savills. It is predicting growth of four per cent next year and 13.7 per cent by 2026.
Across London, where the average property currently changes hands for £676,000, prices are forecast to rise just two per cent next year, and only 5.6 per cent over the next five years as the prospect of increasing interest rates restrict buyers ability to borrow ever-increasing sums of money.
If this forecast plays out the average value of a London home will be almost £714,000 in 2026.
Outside the capital, popular commuter locations like Guildford, St Albans, and Winchester, will continue to see strong demand from buyers no longer expected to work in the office full time, resulting in five year growth of 19.3 per ceBut across the UK as a whole, where prices grew nine per cent this year alone, reaching £328,000, the pace of growth will start to slow in the New Year.
Savills feels this pace of growth is unsustainable and predicts growth rates falling back to 3.5 per cent in 2022 and 13 per cent over the next five years to an average £371,000.