Sister towns along the Thames - Kingston and Surbiton attract residents from all aspects of life. The area has long been a popular destination for both growing families leaving Inner London in search of more green space as well as younger generations leaving home for the first time to study at Kingston University. While Surbiton station allows city workers access to central London within half an hour, the plethora of stores in and around Bentall shopping centre in Kingston rival Oxford Circus and acts as an employment hub for the district.
The last 18 months
Much like in the rest of the country, sold prices from HM Land Registry are still showing an annual decline for homes in Kingston and Surbiton. At an average cost of £608,800 this year, homes in Kingston and Surbiton sold for 1.1% less than in 2023. Despite these homes costing around £60,000 more than the Outer London average, prices here were slightly more resilient to falls than the rest of the capital where the move to higher mortgage rates has impacted affordability and sentiment.
As a predominantly suburban area, movers with families tend to dominate the market. However, high mortgage rates have made the cost of trading up to a larger home costly. Consequently, this year, other buyer groups have found interest in Kingston and Surbiton. First-time buyers accounted for 30% of all buyers in the area so far this year, almost double the 2019 to 2023 average (17%). Unlike most of London, investor appetite has increased here too. Investors made up 10% of all prospective buyers so far this year, up from 7% pre-Covid.
The longer-term picture
Since 2019, price growth in Kingston and Surbiton has broadly tracked the London average, with prices rising around 15%. However, typically there's been a little more price growth outside the capital, with prices across England and Wales rising 18% over the same period.
The well-documented ‘race for space’ played a role in supporting prices across Kingston and Surbiton over the past five years. Houses in particular grew in price by 17% since 2019, meanwhile, (generally smaller) flats only grew in price by 9% across this same period.
At an average of 990sqft, the typical home here comes with 20% more indoor space than those in the inner city. More often than not, there's a bonus of a larger garden too. However, with the 'the return to the office' trend underway, more Londoners are opting to stay in the capital which has supported prices in the area due to the quick connections into the city.
Looking over the last decade, prices in the Thames towns have underperformed much of the country. The close migratory ties to central London, where prices peaked in 2016, have limited the purchasing power of those leaving the Inner City. However, as mortgage rates have fallen in recent months, there are signs that the London market is starting to pick up pace. We expect prices in London to start rising faster than the rest of the country towards the end of the year.
Rising rents
Following record breaking growth in 2023, rental growth has cooled this year. While mortgage rates have moved downwards, reducing inflationary pressures on landlords, a lack of homes available to rent continues to push rents up faster than broader inflation.
Across Outer London in July 2024, rents grew 3% year-on-year, slightly faster than the plateaued growth rate across Kingston and Surbiton. Looking further back however - to pre-pandemic 2019 - rents in Kingston and Surbiton are up 39%, outpacing the 32% seen across the wider Outer London area.
Gross yields have hit a new peak this year in Kingston and Surbiton, which, on paper, should boost investor returns. The average investor purchasing a new buy-to-let here achieved a 5.6% gross yield so far in 2024. Spurred on by rents outpacing house prices, yields are 1.3% higher than the pre-2019 norm of 4.3%.
What's next?
Mortgage rate falls over the last 12 months are starting to stabilise property prices both locally and across London. We expect to see a little bit of growth in London this year, where prices took a bigger hit in 2023.
Looking ahead, we’re expecting a new property cycle to begin in 2025. Historically, Prime Central London areas have kickstarted that growth and we expect this trend to be repeated, particularly given that some of the political uncertainty has now cleared. We forecast house prices to rise 5.0% across London in 2025, with prime areas leading the way.
We’re also forecasting rents to increase 4% across London in 2025. Longer-term supply issues and higher landlord costs will keep rents rising faster than pre-Covid levels and outpacing inflation.
