London property prices hit an all-time high in late 2021.
Its history of performance is well known and its place as one of the world’s prized real estate markets is assured.
But what about the current market?
As we head into a post-pandemic market in 2022 and beyond, can you still secure assets capable of outperforming virtually every other real estate market in the world?
Where can you find the best future growth option, and which sub-markets are most suited to your portfolio needs?
Let’s find out.
Historic performance of London property prices
Over the past 20 years, few property markets have recorded the same level of consistent growth that London has.
Back in 2000, the average property price in the capital was around £200,000. Now, over 20 years later, the average London property price is just over £700,000 – a staggering 250% increase.
For some level of context, in 2021, the FTSE 100 passed 7,000, which is a 1% rise since 2000.
London real estate’s spectacular ROI performance has been driven by a unique combination of the following factors:
- Record low interest rates and a large expansion to the money supply from the Bank of England’s quantitative easing programme.
- Substantial population growth from both international and domestic migration.
- A restricted supply of new housing.
- Wider economic growth underpinned by the City of London.
As mentioned, this lucrative combination is found nowhere else, certainly to London’s extent, and it’s resulted in what’s colloquially known as the London housing bubble.
In reality, although the London market is distinct from much of the transactional activity elsewhere in the UK, it’s not a bubble that shows any sign of bursting either.
Price gap between London and rest of UK narrowing
Rather than the hearsay of the bubble bursting, London’s prices have already contracted with the discrepancy between the capital’s market and the rest of the UK declining through much of 2020 – a market filtered and distorted by the pandemic.
By the fourth quarter of 2020, the average London property was valued at a sum circa 129% higher than the average UK home. This was the lowest this metric has been in 6 years, and down more than 30% since the peak of the London boom in 2017.
It now looks like the market is stable and ready for another period of growth.
London property prices hit all-time highs
Less than one year later, the market is very buoyant once more. The work-from-home COVID era looks set to be over and London is thriving.
Property prices in the UK capital recorded an all-time high in November 2021 – up an average of 5.1%, according to figures released by the Land Registry. Also during the same month, the number of offers accepted hit a decade-long high. Much of this demand was for central London properties, which saw a 116% rise in demand. However, it was a city-wide trend with even districts on the metropolitan perimeter recording a 25% month-on-month increase in demand.
Since the start of 2022, buyer demand and interest in London property has reached a fever pitch – new buyer registrations are already double those experienced in 2021.
Supply and demand behind London property prices
According to the latest figures, the population of London is just over 9 million residents. However, housing stock is limited to just 3.6 million units. As London is home to a youthful population weighted heavily towards graduates and young professionals, the ideal number of residents per household is low.
This imbalance is set to further dictate market values over the coming years. Estimates suggest the population will grow over 10% in the next 20 years, while net housing stock will struggle to get anywhere close to that, considering recent house building activity.
Furthermore, there is international investment to consider. Overseas purchasers have fuelled much of the central London market in recent years, and that voracious appetite is returning post-pandemic. Last year saw the most international transactions since 2013, and with GBP sterling still weak against the US dollar, high-net-worth investors from markets such as the Middle East and Asia can really see the value.
This is particularly pertinent given much of the global volatility currently experienced in other asset classes, with a recent study reporting almost two-thirds of high-net-worth individuals plan on buying a luxury home within the next two years.
Boroughs and opportunities
Average London property prices fail to reflect the full investment potential of a vast, fragmented and diverse market full of nuance and conflicting trends.
A top-level market analysis of London property prices heading into 2022 and beyond would reveal the areas currently experiencing the largest growth are the outer boroughs, where property is acquired at a slightly lower price, and, of course, the most exclusive streets of central London.
Next, we’ll shine a spotlight on some of the boroughs and other areas investors are currently assessing ahead of their next acquisition.
Kensington & Chelsea property prices
We’ve covered the return of foreign investment into the London property market. That influx will impact the Kensington and Chelsea markets the most.
One recent market report noted that demand for prime central London properties had increased almost 50% pre-pandemic levels in the last quarter – almost 10 times the increase in demand for suburban properties. This demand is starting to support values too. Over the past 12 months, property prices in Kensington and Chelsea have already increased 4.5% – the 8th highest rise in the whole of London, and quite a clear indication if you consider the already-high asking prices.
If you’re in the market, it’s good to be aware of the type of properties in demand. Purchasers are focused on houses or apartments with access to shared or communal outdoor courtyards or gardens.
North London property prices
North London is a large local market with a vast range in property prices. Top of the market is the N1 postcode, which covers areas such as Barnsbury, Canonbury and Islington, where the average property value is around £775,000.
However, many investors are eyeing the more affordable N22 – Alexandra Palace, Wood Green area. Just a year ago, properties tended to be averaging significantly less at £530,000, yet the market appears to be on a very fast trajectory.
Over the past 12 months, properties in Alexandra Palace have enjoyed a %14.5% rise in value, pocketing investors an average of £88,019.
Elsewhere in North London, nearby Wood Green has been named one of London’s best places to live and the Victorian and Edwardian terraces, particularly the three-bedroom houses represent good value at £600,000 – as do two-bedroom flats at £400,000.
Putney property prices
The popular Wandsworth suburb of Putney – where the annual university boat race begins – is expressing a good opportunity for investors looking to add a less expensive London flat or apartment to their portfolios.
Like elsewhere in London and the UK, for much of the pandemic-hit market, the race for space meant large houses enjoyed a surge in demand. Subsequently in Putney, flats and apartments took a drop in value of around 20%. They look significantly undervalued now heading into a more normal market and West Putney has been one of London’s best performing suburbs recently.
Demand is high and supply is low as it’s typically an area people aim to live in for 15 to 20 years as it provides an affluent lifestyle with bars on the river, good restaurants and strong transport links to central London.
Bayswater property prices
Home to Westbourne Gardens, the Little Venice canals and on the edge of the famous Hyde Park, Bayswater has been popular with London residents, and overseas investors for a sustained period of time now.
Much of the demand for Bayswater property is from the super-rich. The area’s elegant Georgian architecture, gardens and courtyards have been the subject of a mini-boom, driven by buyers from Russia and China.
Typically properties in the area however average around the £1.5 million mark, but a recent high profile transaction reportedly was a young Russian Billionaire investing over £40 million on a Bayswater mansion. An investor looking to acquire a property ahead of a quick future sale should have a wishlist of at least 10,000 sq ft of living space and close proximity to Hyde Park or the water.
We can source any London property type to fit your portfolio needs and budget
We’ve highlighted a few notable markets and notable trends, but the London market is vast and different hotspots are sure to continue to emerge over the coming months and years.
For further insight and listings please make full use of our website. We also have many agents and specialist knowledge of markets that may not be listed here.
Should you have a particular requirement not immediately catered for, please do not hesitate to get in touch with us.