New figures predict 20% growth in London house prices to 2025
According to a new study by JLL, Londoners can expect to see their house prices rise by a fifth (21%) over the next five years as the capital leads the post-pandemic recovery.
London is set to outperform the rest of the UK next year with house prices staying flat compared with a national fall of around 1.5%, the study reveals.
The suburbs are expected to do well as affluent families upsize to leafy neighbourhoods while first-time buyers head to the more affordable regeneration zones.
JLL’s head of research, Nick Whitten, predicts prices will rise in previously less desirable pockets, too, as buyers prioritise space to work from home over location.
“We are seeing buyers prepared to sacrifice commuting convenience in search of more space, which will drive activity in some previously less fancied locations,” he said. Whitten believes buyers are adjusting where and how they live in London but dismisses the much-debated mass exodus.
Ultra-rich buyers will trigger recovery
JLL reports that the property market recovery will start in prime, central London areas as overseas investors return to the exclusive districts of Mayfair, Knightsbridge, Belgravia, Kensington, and Chelsea.
Central London is a different beast to the rest of the property market, driven by high-net-worth people from around the world. The area performs well out of a downturn, bounces back quickly, and is a safe haven for global wealth, Whitten explains.
“Prices have slid this year in prime central London by 20-30% making these multi-million-pound trophy homes seem comparatively good value versus the equivalent districts in cities such as Paris, New York and Hong Kong.”
However, there is still a link between Belgravia and Barking. When the central London property market is booming, wealth generation and job creation ripple out to the rest of London. Residents in these suburbs spend money on retail, leisure, culture, transport, and food, which benefits the wider economy and by extension, the property market.
Housing shortage will push up prices
A growing housing shortage will also push up prices as demand outstrips supply. Many housebuilders in London have fallen behind during the coronavirus crisis due to increased regulations.
“We expected to see 20,000 new homes built this year against a target of 52,000. In reality, this number has dropped to 10,000 for 2020 due to the industry shut-down and the ongoing need to socially distance on-site,” says Whitten.
The failure of global supply chains at the height of the first wave of the virus led to a run on materials such as plaster, which was dubbed “the pink powder crisis” in the industry.
Stamp duty holiday cliff edge
The JLL paper takes into account the end of the Chancellor’s stamp duty holiday, which was announced in his July emergency summer budget.
This tax break created a micro-boom in London with buyers saving £15,000 on stamp duty above £500,000, but is due to end on March 31 2021.
The pent-up demand and need for space in the lockdown was always going to drive a mini-boom in the housing market. Many industry insiders believe that Sunak should have saved the stamp duty for when sales start to taper off, which is beginning to happen now.
Fears are growing among agents that the sudden closure of the stamp duty window could cause a sharp drop in transaction levels, which typically triggers price falls.
Accumulate Capital Continues to Navigate through Pandemic Restrictions
It is perhaps a credit to the skills of our team that we were able to respond to the pandemic quickly, by defining work-around strategies that allowed us to continue works while observing regulations. The most important measure we have introduced to our development sites is regular COVID-19 testing of all on-site workers.
We currently have opportunities available to get involved in the funding of our new development in Cheyne Walk, Chelsea. As you can see from this article about JLL’s recent research, this opportunity is located in one of the locations set for exponential growth in the next five years. If you want to find out more, contact an adviser today but we urge you to do so promptly as investor-interest in this project is extremely high.