London: ruin or renaissance?
London has always been a star on the global property scene but is it a fading light or a nebula about to be reborn?
London has always had a property microclimate of its own. It is fuelled by a diverse set of aficionados - the plaything of the rich property investor, a second home to the globe-trotting glitterati and the long-time location for luvvies and creatives who feed off the cosmopolitan vibe.
There’s a hierarchy within the hierarchy when it comes to the capital’s bricks and mortar too. The outlying Greater London suburbs, Inner London fringe areas on the cusp of something great, prime Central London property and even a ‘super prime’ market that’s reserved for those with immense wealth. You could say they are nano climates within a microclimate
But is London as untouchable as it is touted to be? BC (that’s before Covid); there was serious consternation over the health of the capital’s property market. As recently as July 2019, the ONS (Office for National Statistics) reported that house prices in London were falling at their fastest pace since the 2009 financial crash. Retrospective research actually shows that the cost of a home in the capital was 4.4% lower in May 2019 when compared to May 2018.
And now? Property values in London rose by 3.5% over the last year, according to the ONS’s most recent figures (February 2021), compared to a national rise of 8.5%. Although small in comparison, homeowners in the capital will have welcomed any uplift, given the downhill trend witnessed just two years ago.
Fortunes may have been reversed but feelings about the future are mixed among experts. The Evening Standard published an article early in 2021, detailing the six major threats to London’s short- and long-term property market. An end to the stamp duty holiday; Brexit; the winding up of furlough; a mass exodus of residents; access to mortgages and the potential for a third Covid wave were all cited as red flags.
Estate agents, expectedly, are taking a more bullish attitude to London’s property prospects. Agent Portico says properties along the central Tube line reaching into Greater London will experience house price growth in 2021, with Leyton, Leytonstone, South Woodford, Wanstead, Chingford, Buckhurst Hill and Redbridge all getting the ‘ones to watch’ nod.
The Buy Association is buoyant too. It is confident that the London property market will see foreign investment remain strong this year, using The Emerging Trends in Real Estate report from PricewaterhouseCoopers and the Urban Land Institute to illustrate. The report named London as the second best place for property investment in Europe, while a separate study by Pure Property Finance found that London occupied 8 of the top 10 spots in terms of locations favoured by foreign companies investing in UK property.
But back to the idea of a mass exodus of London residents – a threat detailed by Evening Standard. The reverse may actually be happening in the rental market, if a new report by agent Knight Frank is taken into account. It says falling rents – values that dropped 13% in Central London in the year to January 2021, taking monthly rents back to the 2009 financial crisis level – are tempting a new wave of tenants to the city.
The agent says this new level of affordability is behind refreshed demand, with a huge jump (up 26%) in prospective renters registering in prime Central London who came from outside the area. In fact, the average distance of prospective renters from the boundary of prime Central London more than doubled to 3.1 miles from 1.5 miles over the same period.
To conclude? Even taking Covid into account, the capital’s property market is looking more positive now than at the end of the 2009 financial crash. While changes are afoot in both the sales and rental markets, resilience still underpins the landscape and London’s safe haven status looks set to stay.