The Tube is packed in the morning, there’s a queue at Pret for lunch and suited-and-booted drinkers jostle for attention in the bars: London is back. The city, and its property market, is once again bustling. Although, as with everything, it’s not quite normal — yet.
This week Rightmove reported that buyer inquiries in the capital have risen by 24 per cent in the past month. However, a chronic imbalance between supply and demand continues to stifle sales and force up prices — asking prices are up 6 per cent in the past month, to an average £667,000, according to the property portal.
Tom Bill, the head of residential research at Knight Frank, says: “The property market in London reflects how the country is undecided about the current status of Covid. Sky-high demand shows people really want the pandemic to be over, but new supply is erratic, which suggests there is some hesitation deeper down.”
Drilling down into the Rightmove data shows the boroughs with the greatest annual rises in asking prices — which are indicators of confidence as well as eventual sold prices — are a mix of outer and inner London locations: Bromley (11.5 per cent); Barking and Dagenham (10.8 per cent); and Kensington and Chelsea (10.6 per cent).
Those with the largest uptick in the past month are just as diverse: Camden (6 per cent); Hammersmith and Fulham (5.5 per cent); and Hackney, where asking prices fell by 0.9 per cent in the past year but in the past month have risen by 4 per cent.
Not everywhere is on the up. In several boroughs asking prices have cooled in the past month: in Westminster (a fall of 1.4 per cent); Lambeth (a fall of 1.3 per cent); Kingston upon Thames (a fall of 0.4 per cent); Greenwich (a fall of 0.2 per cent); and Bexley (a fall of 0.2 per cent).
Gavin Brazg, the chief executive of the property analyst Propcast, has seen a similar pattern. “Buyer demand has increased year-on-year for the majority of London postcode districts,” he says. “However, we can also see that in the last month, between January and February, almost all postcodes cooled. Personally I think a pause is understandable while homebuyers digest fears of inflation and geopolitical uncertainties.”
London missed out on the countrywide pandemic boom seen elsewhere in the country, with Office for National Statistics data showing that the capital experienced a 5.5 per cent property price rise in 2021, while most of the UK registered 10 per cent-plus. It still takes 23 days longer to sell a home in the capital than in the rest of Britain (an average of 49 days v 26 days, in February), according to Hamptons estate agency.
The main cause of London being left behind during the pandemic was a migration from city to country. It is a trend that continues today. “We have more people moving from Dulwich to the countryside and more people from central London moving to Dulwich, because they think it’s the countryside,” says Chris Burton of Knight Frank Dulwich.
These lifestyle moves have led to a narrowing of the gap between property prices in inner and outer London. The average home in inner London was 31 per cent, or £145,400, more expensive than a home in outer London in 2021, down from 33 per cent in 2020 and a peak of 50 per cent in 2013, according to Savills estate agency.
“It feels like a lot of people who had reassessed their lifestyles — but put their moves on hold until the Covid dust had settled — are now activating their searches in record volumes, outside space and work from home being two major tick boxes,” Burton adds.
The wait has caused some buyers to consider their commute, with high demand as we return to offices for easy access to the City and Canary Wharf. “We are seeing a good number of people come across from west or southwest London who have decided they want a shorter journey to work,” says James Marshall, the head of Victoria Park and Hackney at Savills.
At the top end the proportion of sales that involve a price reduction has remained consistently around 50 per cent for London property since 2016, with an average discount in January of just under 8 per cent, reports LonRes, a London property data analyst. In prime, wealthy areas, stock levels in January were down 16 per cent year-on-year, sales instructions down 6 per cent and transactions down almost 10 per cent. The supply-demand imbalance pushed up sold prices by 8 per cent (notwithstanding discounts).
London still represents relatively good value for those with deep pockets or foreign currency — or both. “Prime central London values remain around 20 per cent below peak and buyers now sense a market that has bottomed out. We’ve already seen areas like Notting Hill and Holland Park start to recover — primarily driven by UK-based buyers wanting large family homes — but in the second half of 2021 we also saw the super-prime flat market beginning to take off again,” says Jonathan Hewlett, the head of London residential at Savills.
Flat values were up by 1.1 per cent in prime central London and 1 per cent in outer prime areas in the past year, although sales of flats elsewhere are still mired in the leasehold and cladding disputes. “Flats were definite casualties of Covid times, particularly those without outside space, but it has definitely picked up in central London and the first to recover were in the high-end market,” says Roarie Scarisbrick, a partner with the buying agency Property Vision.
Bill says: “Prime and super-prime markets have flourished despite international travel restrictions, buoyed by strong demand among UK-based buyers. The relaxation of travel rules in October led to higher numbers of overseas buyers, but the flow has been inconsistent.”
“The recent success in the City has certainly increased some purchasers’ buying power, with some having had a very good year, enabling them to skip a few rungs on the London property ladder,” says Jonathan Inglis, the head of Strutt & Parker’s Sloane Street office in Chelsea.
In the second half of last year the number of international buyers across Greater London dropped to an eight-year low, according to Hamptons. Foreign nationals purchased 18 per cent of the homes sold in Greater London, down from 26 per cent in the first half of 2019, as domestic buyers dominated.
However, the proportion of foreign buyers in prime central London bounced to 43 per cent of all sales in the second half of last year, up from a record low of 31 per cent in the first half of last year — although still below the 48 per cent recorded pre-pandemic. The biggest increase was Russians buying in the capital — up 2 per cent on 2019 levels. There are now more than 150,000 Russians living in London; between them they own £8 billion of property, businesses and other investments in the UK, according to the estate agency Aston Chase.
There is optimism that international buyers will return in force this spring. Savills predicts that property in prime central postcodes will grow in value by 8 per cent in 2022 and almost 24 per cent over the next five years, and that houses in the prime leafy suburbs will increase by 4 per cent this year and just under 14 per cent over five years.
The rest of the London market less influenced by international money or city bonuses will be less buoyant, with property prices growing by just 2 per cent this year (against a national average of 3.5 per cent) and 5.6 per cent over the next five years, compared with 13 per cent nationally, as the north-south divide continues to close.
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