The restaurants are full again, the attractions are bustling and it’s back to standing room only on the Tube. As spring begins and London returns to normality following the lifting of Covid-19 restrictions, there are green shoots appearing in the capital’s property market.
During the height of the pandemic, London lagged behind as urbanites moved elsewhere in their droves. Yet, by the end of last year, prices had begun to rise again. By December 2021, values in 30 of the capital’s 33 boroughs were above their previous peaks. This is the largest number since 2017 and is up from only three boroughs surpassing their prior highs in 2019 and 23 in 2020. The largest gains were recorded in Islington – the average home there now costs 11.3%, or £77,400, more than at its previous peak.
There are now only three boroughs that saw higher average prices in any year before 2021: Westminster (2018), Kensington & Chelsea (2018) and Tower Hamlets (2020). However, it is likely that prices in Kensington & Chelsea will increase in the next couple of months and surpass 2018 levels.
Part of the reason for the comeback in Prime Central London (PCL) is the uptick in the number of international buyers, who have traditionally made up a significant portion of this market. In the second half of last year, 43% of the homes sold in the capital’s most expensive postcodes were bought by foreign nationals, up from a record low of 31% in the first half of 2021. Continued Covid uncertainty and travel restrictions, combined with the strengthening pound and the introduction of a 2% stamp duty surcharge for non-UK residents in April 2021, meant foreign buyer numbers were still nevertheless down compared to pre-pandemic levels. In the second half of 2019, international buyers accounted for almost half (48%) of PCL sales.
Despite decreasing marginally compared to pre-pandemic times, the largest share of rage home in the capital last sold faster than one outside. In February, it took an average of 49 days to sell a London property, 23 days longer than in the rest of Britain. It may well take until the start of the next house price cycle for sellers in London to find a buyer faster than their counterparts in the rest of the country.international sales in PCL in the final six months of last year went to EU buyers (accounting for 14% of sales). Middle Eastern purchasers had the next largest proportion of 7%, although this is a steep fall from the 11% of PCL sales they accounted for at the end of 2019.
Outer London’s surge, which was a key story during the pandemic, is also continuing apace, although it is predominantly driven by domestic buyers. Indeed, the share of homes in outer areas of the capital bought by foreign purchasers fell to an eight-year low in the second half of last year.
The price gap between inner and outer London has been steadily closing and by December 2021 stood at the smallest level in percentage terms since December 2009. The average home in inner London now costs 31% more than one in outer London, or a price difference of £145,400. This is down from 33% at the end of 2020 and a peak of 50% in December 2013.
Nevertheless, London still has some way to go before it’s back in full bloom. March 2022 marks six years to the month since an average home in the capital last sold faster than one outside. In February, it took an average of 49 days to sell a London property, 23 days longer than in the rest of Britain. It may well take until the start of the next house price cycle for sellers in London to find a buyer faster than their counterparts in the rest of the country.