The easing of coronavirus travel restrictions and a return to “business as normal” in the capital is leading to a surge of interest in luxury property in the most prestigious areas of London from wealthy international buyers.
According to research carried out by Knight Frank, prices in the PCL boroughs of Westminster, Kensington & Chelsea and parts of Hammersmith & Fulham and Camden, have risen every month for the last six months, taking the rate of increase to 1.2% since the start of the year. This is the first time that price growth is in positive territory since the 2016 Brexit referendum. Knight Frank comment that the recovery of the PCL market, after the shock of the referendum result, is now back on track after the interruption of the pandemic.
According to the latest market forecast released by this week by Savills, prices in PCL are expected to rise by 8% next year and by nearly 24% over the next five years. Strutt and Parker are also anticipating similar rises of between 5% and 10% for PCL in 2022, but estimate that five-year growth could reach as much as 35%. Many buyers are being tempted by the bargains that can be found amongst properties that have remained empty since their owners escaped to the countryside during the height of the pandemic. In some areas of PCL, property prices are 20% below their peak in 2014.
Properties being bought include not only the traditional stock of period homes in the leafy squares and streets of central London, but also new-build properties in flagship developments.
The market in Prime Outer London, which covers areas such as Chiswick, Wimbledon, Richmond and Hampstead , is also expected to perform strongly over the next few years. Savills are predicting price growth of 4% next year and 13.7% over the next five years. Commuter towns in the South East such as Winchester or Guildford are also expected to see a steady increase in prices as many workers no longer need to commute to an office every day. Savills predict that growth could reach nearly 20% over the next five years.
There’s also positive news for London’s rental market. Recent research from London agents Bentham and Reeves shows that rental values across the capital are now on average 9.4% higher than last year. During 2020, rents in London decreased by an average of 3.4%, with some areas, such as Camden, experiencing falls of over 20%. The biggest annual rises are being seen by the outer London boroughs, including Bexley (18%), Kingston (20%) and Newham (15%), with only the City of London yet to return to positive growth. The fact that rental values are now 5.7% higher than they were pre-pandemic is seen as convincing evidence that the London rental market is undergoing a real revival. Bentham and Reeves note that the annual increase in volume of rentals in now 22% higher than it was pre-pandemic. They are predicting a 5.5% rise in rental values during 2022 and express confidence that the decline in the London rental market is now over.
Finally, there was good news last week for homebuyers needing a mortgage with the decision of the Bank of England to keep the base rate at the record low level of 0.1%. Before the announcement, many lenders had been increasing rates for their loans in the belief that the base rate would rise to as much as 0.25%. However, the decision to freeze the base rate means that there are still opportunities for borrowers to lock into low interest rates below 2%, especially if they have a large deposit. Industry experts predict that, despite the end of the stamp duty holiday and the upward pressure on interest rates, there will be no fall in house prices in the immediate future. The demand for homes is expected to remain strong over the next few months, as any small rise in interest rates that might take place will not cause enough financial hardship for most buyers to change their plans.