Prime central London property prices have risen for the last two quarters, giving hope that the long-awaited recovery in the Prime Central London market is finally underway.
Despite the absence of international buyers due to the pandemic, Q3 figures show that the number of homes sold at £2 million or more is up by 5 per cent (when compared with Q3 2020). The number of completed property transactions recorded in the first nine months of 2021 is already equal to the full year figures for 2019. Prices are also 21% higher than the 2015 to 2019 five-year average.
The Background to Current Market Conditions
Before the pandemic, the central London residential market had been adversely affected by political uncertainty resulting from the Brexit referendum. Following the December 2019 general election, however, public sentiment began to shift, and in early 2020 there were signs of returning confidence.
In the months that followed March 2020, successive lockdowns took their toll on the prime central London property market. Londoners tired of home confinement, rejected city-centre buzz and convenience in favour of areas with green, leafy streets and a village vibe.
Some even opted to move out of the capital altogether, eager to enjoy the back-to-nature experience they craved after months of lockdown. At the same time, travel restrictions held back the overseas buyers who would normally be expected to invest in properties in central London.
What has Happened This Year?
The Stamp Duty Holiday offered homebuyers a discount of up to £15,000 on property purchases made between September 2020 and June 2021. This helped to keep the market buoyant up to 30th June, but sales inevitably slowed in the following month after buyers raced to meet the June deadline.
However, activity levels have been stronger than anticipated, helped by historically low interest rates. The volume of sales in the third quarter was down just 8% in 2020 (and 13% less than the average from 2015 to 2019).
Although Q3 saw a drop in sales of properties listed below £2 million, sales above £2 million increased. The market saw 21% more sales at £2m plus (compared with average Q3 sales 2015-19) and 39% more for properties priced over £5 million, compared with the 2015 to 2019 average.
This interest in higher-priced properties in central London is an encouraging sign for the prime sales market.
Houses Vs Apartments
Houses continue to outperform apartments, with a 4.6% annual rise in values for houses, compared to a 1.0% rise for flats. The price of houses in prime areas with six or more bedrooms has gone up by an average of 6.2% over the past year, with five bedroom properties rising by 5.3%.
However, this trend is changing now that office workers have begun to return to London.
Some Londoners who escaped to rural locations are already planning to move back to the heart of the capital, while others wanting to avoid a long commute are purchasing pied-a-terre apartments.
Prospects for 2022
The latest under offer data shows that the end of this year could also be busy for prime sales in London. Each month this year (except July), the number of properties put under offer has been higher than the 2015-2019 five-year average, with volumes rising by 12% in August and 11% in September.
International buyers are also returning to the capital. Before the pandemic, overseas buyers accounted for almost half of all property sales in areas such as Knightsbridge and Mayfair, but travel restrictions saw that cut to a quarter.
With restrictions now lifted, property experts predict a 2% rise in prices by the end of the year, followed by a 7% rise in 2022.
If you are interested in reading more on last month’s trends, please see below the Prime London Market Update Report for October 2021:
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