As spring approaches, the arc of the sun’s path across the sky inches higher to lengthen and warm our days.
The latest figures for the London property market also spread the light of opportunity for international buyers returning to the market, for dollar-denominated investors, and for people who choose flats over houses.
The last peak in the London property market was in 2014. After changes in stamp duty (SDLT), house prices on average decreased by about 25 percent.
Then, from 2020, new patterns emerged. In the wake of the pandemic, London buyers sought larger homes and outside space not typically offered by flats, which dominate prime central London. Domestic buyers drove up prices in less central, yet leafy enclaves. According to the latest report from Coutts, prices for houses have soared in St John’s Wood, Regents Park, and Primrose Hill (up 24.7 percent), and in Hampstead and Highgate (22.8 percent).
As a result of this surge, last year average prices in prime London continued to recover at an annual rate of three percent; however, the average achieved price per square foot in London was still 5.4% below the 2014 peak.
It’s crucial to remember that beneath the headlines lie some important details.
First, different parts of London behave differently. Some areas (see above) now look fully priced, relative to historic levels while others are now more attractive.
Prices in so-called ‘golden post codes’ remain below their highs of 2014. Knightsbridge and Belgravia are down 17 percent, according to Coutts, and Mayfair and St James are down 16.6 percent, which represents historically good value.
Second, another key indicator is that valuations have split: as house prices increased, flat values have not kept up. Prices for apartments, which make up most of the housing stock in prime London, are still 10% below the peak.
One significant contributing factor is the slow return of international buyers, who always favour central London, but had been kept away by the pandemic.
Third, the rental market has been a bit topsy-turvy over the last couple of years. In prime London, tenants left for the country or abroad while international clients could not relocate. The number of homes available to rent went up, leading to a sharp decrease in asking prices.
Now, though, the situation has flipped. During most of 2022, the lack of available stock reduced market activity and led to a rapid rise in average rents—up 24 percent in prime central London, according to Knight Frank.
But early signs in January show things are improving for tenants. The huge supply gap from last autumn seems to have eased. Agents report a rise in listings, which were scarce at the end of last year. Chesterton’s latest figures cite 36% more properties on its books than in January last year.
Tenants now have a bit of choice, so movement is happening. We are hearing, anecdotally, that many high‑end, new‑build properties are available, but strictly on an off-market basis.
Be prepared to act, though, because good properties always attract competition.
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