PRIME CENTRAL LONDON MARKET INSIGHT

MARCH 2021

For the first time in 30 years, London’s population is falling. The coronavirus pandemic has stemmed the flow of people moving into the capital, whilst creating new reasons for residents to depart. So what does this mean for London’s most exclusive housing market?

Before coronavirus struck, London’s prime housing market had enjoyed the best start to a year for half a decade. But with offices shuttered, overseas buyers grounded and a rise in the number of households leaving the capital in search of more space, prime central London’s housing market ground to a halt. Despite the challenges, the number of sales agreed in central London’s most exclusive postcodes in 2020 was within 15% of 2019 levels, and up on 2017 and 2018.

Rental prices in inner London have fallen sharply, with rents falling 17.7% in February compared with the same time last year. But house prices have weathered the storm. According to LonRes, house prices in prime central London rose 2.2% in 2020 compared with 2019. But this growth masks a divide between flats and houses.

With demand for more space top of buyer’s priority lists, houses have outperformed flats. Last year the average house in prime central London went under offer within 62 days of its instruction, for flats it took 65 days on average – a reversal of 2019. LonRes noted a 1.3% price fall for flats in Q4 2020 compared with the same time last year, in sharp contrast to the 5.7% annual increase for houses. Last year, flats made up 78% of completions in prime central London, the smallest share since 1996.

Despite a new year bringing a new lockdown, momentum in London’s most exclusive housing market has continued. But with 14% fewer homes coming onto the market in February than during the same time last year, our data shows that the average home sold in prime central London so far this year achieved 95.9% of its original asking price, up from 92.9% during the same period of 2019 and reaching the highest proportion since 2016.

Looking ahead to the rest of the year, and as lockdown measures are eased, we expect many of the homes which would otherwise have changed hands during lockdown to come onto the market. Demand for prime central London property is less likely to be curtailed by the end of the stamp duty holiday given the maximum £15,000 saving makes up less than 1% of the average purchase price. And as London’s world-renowned amenities and offices reopen and travel restrictions loosen, it will reaffirm the fact that for many, the lure of prime central London living, while on pause, never really went away.