UK house price growth over the past 12 months has been the highest since before the Global Financial Crisis.
There will continue to be strong price growth across all major markets, albeit at a slower rate of growth to reflect the removal of the stamp duty holiday, removal of furlough and some current uncertainty and disruption around fuel, deliveries, and inflation.
Price growth will be driven by mortgaged mid-life stage households who have seen strong wage growth, have built up some equity over the past decade and can access 5-year fixed mortgages at record low rates.
Cities will bounce back more strongly in terms of price growth and rental growth than rural areas as there continues to be a renewed desire to return to more ‘normal life’. This bounce will particularly be felt in 2022 and 2023.
Price and rental growth is expected to cool in 2024 after an extended period of strong growth. This cooling will also reflect uncertainty heading towards the UK General Election, which is currently scheduled for May 2024. However, the election could be held earlier, which in turn would signal a quicker cooling of price growth, if the UK Government’s proposals to repeal the Fixed-term Parliaments Act come to fruition.
Manhattan real estate posted its best year ever in 2021, rebounding from the pandemic with $30 billion in sales and over 16,000 signed contracts.
Last year marks a dramatic turnaround from 2020 when fears of population losses weighed on sales.
But sales have now eclipsed pre-pandemic totals, and are showing no signs of slowing in 2022. Fourth-quarter sales topped $6.7 billion, a mark not seen since such records were kept.
The average price for an apartment in Manhattan is now $1.95 million. The median price — which many consider to be a more accurate indicator of the market — jumped 11% in the fourth quarter compared to the year-earlier period, close to pre-pandemic levels.
Based on reducing inventory and continually strong financial markets, the Manhattan market is likely to remain robust into the first half of this year. Because New York was late to the party with the return of real estate demand, there could be several quarters ahead with elevated or higher-than-normal activity.
The comeback has largely been driven by the top of the market — such as ultra-wealthy buyers snapping up penthouses and large full-floor units in new developments. Inventory of new property plummeted by a third in the fourth quarter, and apartments priced at $10 million or more sold the fastest — averaging just 97 days on the market.
There were at least eight sales last year for more than $50 million. Alibaba co-founder Joe Tsai’s purchase of two full floors at 220 Central Park South for $157 million was the largest. That address — home to hedge fund billionaire Ken Griffin’s $238 million penthouse, the most expensive ever sold in the U.S. — accounted for three of the eight $50 million-plus deals in 2021.
Jeff Bezos continued to snap up apartments at 212 Fifth Ave., with purchases totalling $119 million for five apartments.
Many buyers are non-residents looking for a pied-a-terre or an investment property. With riches created during the pandemic from gains in stocks, asset values and cryptocurrency, many individuals are looking to shift their wealth into hard assets like real estate.
Earlier this year London’s new Westminster City Plan was put in place as part of the borough’s planning blueprint until 2040.
Included in the plan is a maximum housing size of 200 square metres for future homes in residential developments.
As on one of the capital’s largest boroughs, stretching from the Thames in the South to Regent’s Park in the North, Westminster City Council contains some of London’s most sought after locations. Areas including Mayfair, Marylebone, St James’s, Bayswater, Whitehall as well as parts of Belgravia and Knightsbridge will be effected by the new ruling.
New rules give large units rarity value
Newly built, larger homes already built or in construction within Westminster will likely become even more of a prized asset as future supply is restricted.
At the same time, the desirability of larger homes has been further enhanced following the impact of the global pandemic: spacious, light-filled properties with home office rooms and views over open green spaces are now greatly in demand.
This is likely to create a two-tier market where the price of homes in excess of 200 square metres are likely to be higher than those sub-200 square metres. This would suggest a potential higher capital value gain for those who purchase these homes now while there is still new supply in the marketplace.
In the short term, it is good news for developments that feature larger units, including those featured below:
Turkey’s nationwide house prices soared by 26% during the year to Q3 2021,
With an average of TRY 4,054 (US$502) per square metre, according to the Central Bank of the Republic of Turkey, ranking it as the number one nation for real estate price growth in the past 12 months.
The real estate growth has largely been driven by foreign investment, which is expected to reach nearly $7.5 billion in sales this year. In January-August, house sales to foreigners increased by 47.6 percent compared to the same period of 2020 to reach 30,849, according to data released by the Turkish Statistical Institute (TÜİK), with the total number forecast to be close to 50,000 by the end of 2021, which would be an increase on the past two years (2020 – 40,000 and 2019 – 45,000)
In August alone, 5,866 houses were sold to foreigners, Istanbul had the lion’s share with 2,729 units sold followed by the Mediterranean province of Antalya (976), the capital Ankara (400), and the Mediterranean province of Mersin (242).
Residential Property Price Index (RPPI) (2017=100)
Over the last six weeks, a tenant’s market has become a landlord’s market in prime London as supply has fallen and demand has hit record highs.
Supply has been curtailed as would-be landlords have sold to capitalise on surging demand in the sales market and as staycation rules have been relaxed a number of investors have returned their properties to the short-term rental market.
In addition, the return of overseas students and the re-opening of offices has driven the demand side of the equation.
These factors have contributed to upward pressure on prices, with average rents in prime central London rising by 1.2% in the three months to August, the biggest such increase since July 2018. In prime outer London, the quarterly gain of 0.9% was the largest since June 2018.
As shown in the below chart, of the properties rented, the areas around London’s two main financial districts (the City and Canary Wharf) showed the greater activity with 28% of listings rented in August in comparison to 22.5% for Greater London, a figure that was at 13% at the start of the year for both groups. This divergence shows the clear trend that the re-opening of offices has been driving lettings activity.
So far the pandemic has driven house prices in the mainstream housing market, but the prime sector is now surging ahead.
Price growth for luxury homes across 46 cities increased at an average rate of 8.2% in the year, up from 4.6% in the first quarter according to the Prime Global Cities Index by Knight Frank. In comparison, mainstream prices increased by 7.3% on average.
Toronto leads this quarter’s results recording annual prime price growth of 27%, driven by strong buyer appetite and low inventory levels. Despite a recent cooling measures, the next three rankings are occupied by key Asian cities – Shanghai (21%), Guangzhou (20%) and Seoul (20%). Miami (19%) completes the top five.
An easing of travel rules in some markets, a surge in safe haven purchases by domestic buyers, a flurry of activity ahead of the tapering of stamp duty holidays, and an overall reassessment of lifestyles and commuting patterns, all set against a backdrop of low interest rates have been causing the price increases.
Although not one of the top performing markets London registered a 0.7% uptick in prime prices, but it was the first time that prices saw positive growth since May 2016 and along with Paris and New York, these cities are forecast to increase in the rankings, as travel restrictions ease and international buyers start to recognise the relative value in these cities.
Sydney leads in 2021 with the city expected to see growth of 10%.
Next year, Sydney is also expected to outperform and will share the top spot with London, both cities are expected to see an increase of 7% in 2022.
Miami is predicted to have the second-highest increase this year at 6%, with a further 4% in 2022.
New York should see prices rise by 4% this year, which would be its strongest performance since 2015, followed by a further 3% rise in 2022
What is driving the increase in values?
Government measures have helped protect economies, and cities are now on the rebound.
In addition, the pandemic has inspired many buyers to relocate or expand their holdings. Households accrued a total of over US$5 trillion globally in savings during lockdown, enabling some homeowners to undertake home improvements. Others have opted to relocate, upsize, downsize, or buy a second home/investment property.
The lack of supply in several key cities has been exacerbated as construction rates slowed due to lockdowns and social distancing, putting upward pressure on prices
What lies ahead?
The outlook for prime residential markets will be closely tied to the ease with which cross-border transactions can start to normalise, and whilst virtual viewings and improved technology have assisted in this area, the reality is the resumption of commercial air travel will be key.
New York City rental markets showed strong performance in June, driven in part by a flurry of luxury activity, an indication that as Covid-19 infection rates continue to dwindle, the city’s wealthy residents are returning in droves.
While prices were largely flat—Manhattan’s luxury rental market saw median prices decline by 2.9% year over year, according to Douglas Elliman’s June rental report
The Manhattan luxury rental market’s strength has been transformed during the pandemic era into one of the stronger segments.
Areas like the West Village in Manhattan, are particularly hot, with demand so high for some units that landlords are asking prospective renters to submit their best and final offers above the advertised rent price—akin to what would be expected in a competitive market for home buyers. Still, the median rental price in Manhattan is down 18.5% compared to a year ago, while Brooklyn is down 16.2% and Queens 13.1%.
Qatar Islamic Bank-UK has said since the emergence of the Pandemic, the London prime residential markets are exhibiting signs of successfully being able to cope with most of the COVID-related disruptions, supported by the stamp duty holiday in place since summer 2020.
According to data consultancy LonRes, the number of Prime Central London (PCL) transactions that took place in March 2021 is considered the highest since 2016.
The number of properties sold in the first five months of 2021
This sharp improvement in market sentiment can be partly attributed to the success of the UK’s vaccine program and the first signs of travel reopening. This optimism, though, is susceptible to any changes that might occur in the pandemic course.
In fact, the resilience of the Prime Central London and Prime Outer London (POL) markets is not just the result of the relative success of the fight against Covid, it is now clear that the markets did, indeed, enter Q2 with the benefit of a protective buffer of unsatisfied demand, as many had predicted it would. This buffer is expected to persist, if the latest reports from real estate agents describing clients’ eagerness to purchase, once international travel restrictions are relaxed, prove to be reliable.
Property Types & Locations in Demand
Overall, early lockdown enthusiasm for large family homes with good access to open areas such as parks, beaches and countryside, remains in demand. The market is also witnessing demand in East London as the prospect of return-to-work improves. There is an increased demand specifically in locations close to employment hubs in the capital city, like Docklands and Midtown, and specific SE/S Outer London locations, such as Clerkenwell, Shoreditch, and Victoria Park.
These locations also have the advantage of shorter average home-to-office commute times providing a better alternative for those who are keen on avoiding lengthy exposures in public places during any future potential virus breakouts or pandemics.