The Future of the London Property Market
The Bank Of England’s recent decision to raise interest rates contributed to a fall in UK house prices of 0.1% last month, the first fall in prices since June 2021. But what is the outlook for London ?
Prime central London's house prices are expected to grow 4% across 2022 (down from +8% previously forecast November 2021). This revised prediction perhaps reflects fewer current international buyers than previously anticipated. International arrivals to the UK are still 18% lower than pre-pandemic levels.
Domestic political instability and war in Ukraine continue to cause uncertainty and most experts now expect price growth to slow further with some areas such as Barnet, Merton and Richmond upon Thames seeing a drop in prices.
However, a revised five-year prediction recently provided by real estate firm Savills predicts continuing significant levels of activity in central London and top regional markets, such as Glasgow and Bristol.
“The pace of return of international buyers has so far been slow, holding back the more rapid recovery we had previously anticipated. Early indicators suggest that things should improve over the second half of the year and into 2023…”, comments Frances McDonald, research analyst at Savills.
For investors looking outside the capital, the primary markets of Scotland and the Midlands have the most potential for growth over the next five years with a combined growth rate of up to 22.8%.
The London rental market continues to suffer from an imbalance between supply and demand causing bidding wars between tenants competing for the best properties on the market.
Despite current uncertainties, there are good grounds for optimism. London home values remain among the highest in the country with larger family homes in Mayfair, Kensington, Chelsea, and Belgravia attracting particular overseas interest. The new academic year will create increased competition among buyers through September and October and workers returning to the capital will only accelerate this demand, particularly for flats.
Where prices go now however, will largely depend on interest rates, the rising cost of living and how far these factors restrict the spending power of buyers.