London Property Market Update July 2021

It is important, as a buyer, seller, or landlord to know the essential property statistics. As an agent in London, I wanted to share with you the most recent statistics for London for the 2nd quarter of 2021. 

Between 2010 and 2013, London had one of the fastest-growing prime property markets in the world.  By the third quarter of 2013, its luxury homes were the most expensive globally – at $3,995 per sq ft, compared with $3,917 in Hong Kong and $3,101 in Manhattan. 

But since the peaks of 2013/2014, the capital’s housing market has been in quite the slump. 

We’ve had Brexit and the pandemic travel restrictions which have muted price appreciation.  

This while other regions of the country have had runaway house price growth over the past 13 months as the fight for space both indoor and outdoor have become critical. 

Building society Nationwide put the annual growth of the average UK house price in June at 13.4%, the fastest growth since November 2004. But London has lagged, particularly in the market for the most expensive homes. Prices for £1m homes in central areas have fallen by about 17% since 2014, according to LonRes, which monitors the London market.

 UK house prices rise at fastest rate since 2004 amid stamp duty rush

The 13.4% annual increase includes a 0.7% increase in June from May to £245,432, marking the highest annual growth rate since November 2004.

2Q21 Property Price Data for the UK

In terms of quarterly growth through June, Northern Ireland and Wales recorded the strongest gains in the second quarter, at 14% and 13.4% house price growth respectively. Scotland posted the weakest house price growth at 7.1%, closely followed by London at 7.3%.

Prices rose in London at an annual rate of 7.3% in the second quarter of the year, up from 4.8% in the first quarter. The average value rose £27,359 over the three month period from £482,576 to £509,935.

It is the first time since Nationwide began compiling regional figures in 1973 that the average cost of a home in London has exceeded half a million pounds. This is an almost 40 fold increase since being recorded as £12,848 in the fourth quarter of that year.

In June 2016, the average price of a home in the capital stood at an all-time high of £468,120, according to the Land Registry, having added more than £100,000 over little more than two years.  Five years later, after having essentially flat-lined for half a decade, the average value is £491,687, an increase of just 5%, or 1% per year.

Even worse, over the same period, inflation has averaged around 2%, meaning that the roof over your head has gone down in value in real terms.

Affordability of London Houses

From an affordability perspective, London house prices now cost 11.7 times the average salary.  But, while London still has the highest house price to income ratio in the country, it has grown the least of all UK regions since the stamp duty holiday was introduced. 

With average British salaries now £31,770, and £257,726 the average national house price, the house price to income ratio is 8. Before the stamp duty holiday, it was 7.5.

London Property Forecasts

So what’s to come?  Well, no one really knows but there are a few key stats worth highlighting. 

The Evening Standard forecast that the capital’s population will drop by 300,000 this year, which is considerable, seeing as it has been seen as a central point for those who work and live in the city, however, as people start to work from home this requirement is no longer needed. This may therefore affect the property market in the city.

In terms of the most expensive areas in London, in July, according to the Evening Standard,  asking prices in Westminster rose 5% to a huge £1,437,811, the highest jump of any district of London, followed by Kensington and Chelsea (up 2.4% to £1,689,368.) 

We think that London prices will continue to increase through the rest of the year assuming the Covid picture stabilises or doesn’t get dramatically worse triggering continued travel restrictions, which means Domestic buyers may find a bit more competition if international travel resumes.   

Given we are in such unsettled times, it really is hard to predict what the next 6 months will look like.  Let’s hope the coronavirus continues to diminish in this country and the rest of the world for that matter such that optimism can return.