Key London Property Market Statistics – 1st Quarter 2021

Can you believe it’s already April and the 1st quarter of 2021 is in the books? Well, it is and so this article is going to give you an update on the London property market. We’ll cover some statistics as well as discuss projections of where the market is going. 

For the UK: 

• The rate of annual house price growth slowed to 5.7% in March, down from 6.9% in February. 
• The average UK house price at £232,134.

For London:

• For the first three months of 2021, London was the UK’s weakest performing area, with annual price growth falling to 4.8%, down from 6.2% in the final quarter of 2020. 
• The average price in London for the first quarter was £482,576.

North-west England:

This was the UK’s strongest-performing region:

• Annual price growth has risen to 8.2% year on year. This is the highest rate of price growth in the area since 2005
• Average prices there have hit a record high of £181,999.  

These stats are all provided by lender Nationwide. 

Prime Central London

Prime Central London has struggled over the last several years and particularly during the pandemic. The end of March 2021 saw a .4% quarterly increase which was the first time since the general election of December 2019.

In the 1st Quarter of 2021, prices in outer prime London grew 0.7%, while those south west of the capital increased 1.3%.

What about Transaction Volume? 

These next 2 graphs really help to give us an update.  The data is from the Plumplot and we’ll have the link in the description box.  In the London region, there were approximately 61, 400 property sales for the previous 12 months ending February 2021.  This was a drop of 30.9% from the prior 12 months.  Most properties were sold in the £500K – £750K price range with 15,423 transactions completed. 

This next graph shows that the bulk of transactions are in the resale market versus new build sector which has stayed well below 25,000 and dropped off further in 2020.  London has a chronic housing shortage as most industry experts say the city should be building at least 50,000 units per year to keep up with demand.  

So, while we saw decent price growth in 2020 and continued price growth in 2021, we’ve seen a significant drop in transaction volume.  So what are the key factors impacting the property market, particularly here in London?  

Growth last year was driven by several factors including: 

• Pent up demand as scores of people reassessed housing needs during the multiple lockdowns
• Government measures were put in place to boost buying, such as the stamp duty holiday which was originally scheduled to expire on 31st March.  However, last month, the UK spring Budget delivered the housing market a further boost by extending the stamp duty holiday deadline to 30th June with a taper down through to 30th September. 
• Meanwhile, a mortgage guarantee scheme to help first time buyers with a 5% deposit was also launched, available for up to £600,000.  In addition, the furlough scheme has been extended.
• Mortgage interest rates continue to remain low (as shown in the table below).

Advice for Foreign Buyers

For foreign buyers, I want to showcase how the pound has performed of late.  Whether it’s the Euro, US dollar, or Chinese Yuan, the British Pound has strengthened relative to these currencies.  This means if you are needing to transfer your local currency in order to buy a property in the UK, it will cost you more today than it did a year ago.

Foreign buyers also now have to contend with an additional 2% stamp duty surcharge that has gone into effect as of 2nd April.  

Short Term Outlook

So the overall economic factors along with the positive pace of the UK’s vaccinations programme means that many, including myself, anticipate that the housing market activity will remain strong in the short term.  

For foreign buyers, they will need to factor in the additional cost given that their currencies have weakened relative to the pound. Also, the additional 2% stamp duty surcharge that I mentioned.  Foreign buyers represent about 40% of prime central London purchases and many have been not been able to participate over the last year due to travel restrictions.  I’ve recently closed several transactions this year for overseas investors who have purchased “sight unseen” on the properties I found for them. They were looking to take advantage of reduced property prices, strong currencies and low-interest rates. But for those looking for a second home, they have not been able to participate as many will want to come and see the properties for themselves which does cause pent up demand but we’ll have to see how the currency and stamp duty changes dampen this demand.  

Longer-Term Outlook 

Overall, the long term outlook is uncertain.  While positive aspects include that the economic recovery continues as vaccinations increase and the economy opens up while interest rates remain low.  In addition, with travel restrictions eased, we could see a flood of international buyers coming back into the market.  However, labour markets could weaken as the government support is withdrawn and the actual impact of Brexit restrictions could have an adverse impact on the economy. Inflation doesn’t seem to be a concern for the short or mid-term as at 0.4% it is well below the bank of England target of 2%. 

I hope this has given you a good sense of the current state of the London property market and the key factors. If you would like to receive a comprehensive property report as a download, please let me know.

There is always so much to consider if you are thinking about investing in the London property market.  If you’ve got questions or just want to know what mortgage rates you may qualify for, then please get in touch.