London Property Market Update | What does 2021 have in store?
January 7, 2021
We survived 2020 but what does 2021 have in store for London and the London Property Market?
London Property Market Figures for 2020
Somehow, in the midst of a global pandemic, the overall UK property market saw growth in 2020 with house prices rising 7.6% to an all-time high average of £253,243, according to the Lender Halifax. In London, average prices reach their highest level ever, at £486,005.62 in the fourth quarter of 6.2%, from the same three months in 2019
While London prices went up, according to The Guardian newspaper, London leavers actually had a big Exodus, and they bought 73,950 homes outside of the capital in 2020. As the coronavirus pandemic led to the biggest exodus from London in four years, this surprising good news on the property front was driven heavily by pent up demand, reassessment of living working conditions from home, and the government’s stamp duty holiday which saved buyers on their stamp duty bill by up to £15,000.
Buyers want a separate room for working from home
A key trend that we’ve seen beyond not just buyers seeking private outdoor space, is also less open plan living. Given that many who have gotten used to working from home may not be returned to the office full time, people are seeking separate live workspaces within the home. That might mean opting for a third bedroom instead of an open plan living.
Buyers are happy to walk further for transport
Another interesting dynamic is that people are now willing to walk further to a tube station, in the past the maximum distance when people were searching would often be up to 10 minutes, but we’re seeing that buyers are now willing to go slightly further – up to 20-minute walk in order to avoid others and to get a bit more exercise in their daily commute.
Buyers still want the neighbourhood vibe
While people are looking for that green space, and perhaps some people for that village life that outside of London offers. Many people are still keen to have what the London neighbourhoods offer which are great restaurants, cafes, shops, and interaction with others if you want to know more about what buyers want and check out my recent video where I talk about the top features that are showing up for many buyers.
London Property Market Forecast for 2021 – Statistics and My Thoughts
So what about the outlook for 2021? Well, in a word, it’s “uncertain”.
A lot will depend on the speed of the vaccinations in this country. With this in mind, the reopening of key sectors of the economy, and a return of international travel, many analysts predict the economy will weaken, driven by rising unemployment and the end of the stamp duty holiday, which is set to expire on the 31st of March 2021. But I am actually not so certain.
April and May will be hard for the property market in London – but there’s hope for the future
While I do think April and May will be hard months as many buyers who missed out on completing before the stamp duty deadline may withdraw from the market. Others might try to take advantage by securing further price reductions to compensate for missing out on the stamp duty savings. If we see meaningful progress in vaccinations by March, there’ll be a real optimism in the market.
Foreign Investors May Ignite the Market
In 2020, we’ve already seen foreign buyers snapping up deals “site unseen”. So if there’s a return in international travel, then I think we could really see the market ignite, and particularly in zones one and two in London, where foreign buyers are most dominant.
I know from my perspective, I’ve bought several properties for international buyers in 2020, who didn’t come and see the properties, in two separate cases. I even bought second properties for buyers, internationally, meaning foreign investors are taking advantage of the market in 2020, so I can imagine when the world opens up again in 2021, we’re going to see a flood of international buyers.
Stamp Duty Changes for Foreign Investors in April 2021
Having said that, though, there’s an additional 2% stamp duty surcharge that’s due to take effect in April for foreign buyers. This might tap down demand at least initially, but we’ve seen the London property market rebound in the past, so I think once they absorb it in and acknowledge that that’s going to be an additional cost of buying property, they’ll feel more comfortable and start investing once again.
Property Predictions from The Office for Budget Responsibility
Another sobering note is that the Office for Budget Responsibility – the Treasury’s economics forecaster – expects that house prices will plunge by more than 8% in 2021 before stating a rapid recovery in 2022. Something to note however is this is for the entire British economy, and we know that London has always been a bit of an outliner and kind of operates based on its own set of circumstances.
Brexit Uncertainty is Reducing
Now that Brexit is somewhat settled, London will continue to be interesting to foreign buyers as they are beginning to see the end in sight and know what to expect from the UK economy and future.
In addition to prime central London other areas to watch are Battersea to the south with the Northern line extension, and Acton to the west due to Crossrail bring commuters into central London within 10 minutes.
So what do you think that London prices will do in 2021? Make sure to leave me a comment in the section below. I hope this article has been helpful in giving you a sense of some key dynamics that might be taking place as we get into the new year. If you have any questions about the London property market, please make sure to follow me in social media reach out or drop me a note in the comments section below.