Prime housing markets of London and South East to lead recovery in 2025

London is set to cast off its gloomy mood to lead the house price recovery, rebounding in 2024 and outpacing other regions in 2025.  The top estate agency Hamptons is forecasting that, by the end of 2026, the average price in the city is set to be 12% higher than today.  The South East should also be a top performer, rising 9.5% by 2026, following a bounce of 6.5% in 2025. Over the four-year period, the average price in Great Britain is expected to increase by an average of 5.5%.

The tempo in London was already slowing before the arrival of higher interest rates in late 2021.  When the cost of borrowing goes up, the capital tends to be harder hit than other regions because more London homeowners have a mortgage than elsewhere, and they tend to borrow higher multiples of their income.

But, as mortgage rates start to decline in 2024, the city will revive and the average price should creep up by 1.5%.  The South East is set to follow a similar trajectory, edging up by 2%.  This will be in contrast to regions such as the North West which performed strongly between 2017 and 2022.

Hamptons is forecasting that a new housing cycle will begin in 2025, with London at its vanguard, surpassing other regions for the first time since 2015.  As Aneisha Beveridge, Hamptons head of residential research points out, this has been the pattern of previous cycles.

At the beginning of the current cycle, prices in London grew by 71% between 2008 and 2015, significantly outpacing the rest of the country where prices rose 26%.  However, over the last seven years, price growth in London has been more muted.  The average value of a home in the capital increased 21%, less than half the growth recorded in the rest of Great Britain (43%). 

A general election is due by January 2025. In previous decades, this would have had a disruptive effect.  But Beveridge argues that the British may have become more comfortable with political uncertainty following the upheaval of Brexit and the pandemic.

She adds: “Another reason why the election may not make much difference is the stance of the two main parties. Both are pitching for the centre ground which limits the possibility of radical change.”

Prime central London could be more vulnerable to election apprehension because buyers in these neighbourhoods worry about extra taxation.  Sellers here tend to be discretionary and are more than willing to hold their properties, many of which are investments, until they feel the conditions are right to sell.  

Grant Bates, head of Hamptons private office London, says that London’s position as a global hub means that it is “historically seen as a safe place to put your money.”  Hamptons data suggests that international buyers purchased three in ten homes sold in prime central London during the first half of this year.

Bates comments: “Beautiful period houses on beautiful streets in the Platinum Triangle of Mayfair, Belgravia and Knightsbridge are still selling for close to 100% of their valuations, and sometimes above.  Also in demand are addresses such as the Little Boltons in Chelsea and the Canonbury Triangle around Canonbury Square in Islington.”   .

Cash buyers are common in prime central London which has provided support in the downturn.  But it is also clear that prices in the other postcodes would have fallen more steeply without the tough affordability tests imposed on mortgage borrowers in the wake of the financial crisis.