The London prime property market was as busy as it’s ever been over lockdown, but prices are still finding their feet.
Rise in number of properties sold compared with Q1 2020, just as the first lockdown hit.
Properties are selling 18 days more quickly than this time last year.
Fall in prices compared with same period last year.
Source: Coutts & Co, LonRes, April 2021
With properties spending less time on the market compared to a year ago, sellers appeared to prioritise a quick sale rather than hold out for a higher price this quarter.
Overseas buyers, an important source of demand for central London homes, have faced travel restrictions with fewer able to make the trip over to purchase or view prime property, which may also have impacted prices.
Activity in the London prime property market continued to rise in Q1, despite the conditions of lockdown.
The impending stamp duty holiday deadline on 31 March spurred on purchasers looking to take advantage of the savings. The deadline was extended in March, but by then many buyers were ready to complete.
While the number of overseas buyers has been low due to travel restrictions, the arrival of a 2% stamp duty surcharge on overseas buyers at the end of March acted as an incentive for them to transact, too.
New instructions were slow at the start of the quarter as many sellers assumed they’d left it too late to benefit from the influx of buyers hoping to meet the stamp duty holiday deadline and others were put off by lockdown. In March, the stamp duty extension and positive news on the easing of lockdown restrictions resulted in a surge in new instructions, making up for the slow months.
Prime Property Market Trends For 2021
Low Interest Rates Will Support Demand
The prospects for economic growth in 2021 have led to higher inflation expectations and rising bond yields (that is, falling prices). However, there’s no sign of any change in the Bank of England base rate in the UK. We continue to expect a very favourable low base rate regime for the next two to three years, which will continue to support demand for residential property.
Buyers And Sellers Emerge From Lockdown
As restrictions ease through the year, the previous ways of transacting are likely to re-establish themselves. We expect that this will see an increase in new listings as seller reluctance over viewings recedes. The real estate sector has done well to mitigate the barriers put up during lockdown, and some of these innovations – such as remote viewings – could stick, particularly for overseas buyers.
Return Of Overseas Buyers
We expect increased interest from overseas buyers as travel restrictions ease through 2021. Overseas interest in commercial property is already evident, reflecting an undervalued currency and attractive yields. Commercial estate agent Colliers reports that £3 billion was invested in UK commercial property in March, with overseas investors accounting for half of the assets. We expect trends in residential to follow commercial through 2021.
Prime London Area Focus – Q1 2021 Performance
Use the map and postcode selector below to see how each area performed last quarter.
Super-prime sales resilient in 2020 due to domestic demand and the search for space.
Buyers dropped nearly US$4bn on $10m-plus properties in the UK capital in 2020, putting it ahead of traditional rivals New York and Hong Kong in the luxury real estate stakes.
The analysis by Knight Frank shows there were 201 super-prime transactions in London, averaging out at $18.6m apiece. Hong Kong saw 169; New York just 117.
New York’s super-prime market had a particularly tough year, what with the presidential election slowing things up and the impact of the Covid-19 lockdown between March and July. But while sales were down, the average price increased by 5% annually as buyers honed in on larger homes. Meanwhile, super-prime deals soared in US coastal hotspots, like Miami (89 at $10m-plus was more than double the previous year’s tally), LA and Palm Beach.
Worldwide, the super-prime spend totalled $19bn in 2020, which was 5% below the previous year’s figure. Overall volumes were only 1% lower, however.
Transactions over US$10m*
Source: Knight Frank Research. *Exchange rate calculated as at 31 December 2020
Prime London market busier than post-election bounce, as high-end sales continue to soar
After a small fall in the number of homes going under offer in January, February saw under offers increase. The number of homes put under offer in February was up 9% on the same month a year ago and 19% higher than the five-year (2015-2019) February average.
Sales volumes rose too, with February recording an 8.8% increase in sales (exchanges) this year compared with last. Comparing sales by price band over the last three months (December to February) shows that sales increased across the board. But it was the £5million+ market which continued to record the highest annual rises, up 19% on the same three months a year earlier.
Over the last three months (December to February) achieved prices across prime London fell by 1%. Both homes selling for below £1 million and above £5 million saw small increases with properties sold between £2 million and £5 million recording a 3.5% annual fall.
Looking ahead continued growth in under offer volumes means that the sales pipeline is well placed for further growth in the coming months. However, there remain some challenges ahead, most notably when overseas buyers can return. But we still expect good things from London’s prime market this year and buyers appear to feel the same.
Birmingham projected to see highest property price growth between 2021-2025
Prices in Birmingham are forecast to grow 19.5% between 2021 and 2025, Manchester an 18.5% rise is predicted while Prime Central London will see an 18% growth. These key locations are predicted to outperform the UK national growth average of 14.5%.
Prime Central London
The acute housing undersupply issue in Greater London will be exacerbated by COVID-19 with new housing starts falling to an average of 12,500 pa over the next 5 years, compared with a housing need for 52,000 homes pa. This will underpin price and rental growth in the UK Capital.
Having already fallen in Prime Central London in 2020, prices and rents will begin to grow again in 2021. As the downturn begins to abate wealthy global investors will turn their attention to Prime Central London, one of the world’s most exclusive housing markets, as they did after the Global Financial Crisis.
House price change (%pa)
Rental value forecasts (%pa)
Of all the housing markets that JLL monitors, Birmingham is forecast to see the strongest house price and rental value growth over the next 5 years.
HS2 and the 2022 Commonwealth Games are Important catalysts for growth in Birmingham. The city is also seeing a growing housing shortfall. However, Birmingham City Council is seeking to accelerate the regeneration of council owned assets to deliver new mixed tenure housing solutions including private sale, build to rent, student accommodation and later living solutions
House price change (%pa)
Rental value forecasts (%pa)
Some areas of Manchester will see price falls and some areas which will see price rises as demand for living in big cities recalibrates post-COVID.
This will result in house prices being flat in 2021 before growing strongly from 2022 onwards.
There is a limited availability of new homes to purchase in Manchester underpinning values.
Houses in the £2m to £5m range have been significantly outperforming the rest of the market.
At the start of 2021, new properties coming to the markets fell 15% compared with January 2020 and were 22% lower than the previous five-year average (2015 to 2019) too.
As well as fewer new instructions, properties going under offer dropped in January too. January 2021 saw 5% fewer properties go under offer than in January 2020. But the impact of a strong January market last year is at play here too. Indeed, the number of homes put under offer in January 2021 was higher than in January 2017, 2018 or 2019. Each of the last six months of 2020 recorded an annual increase in properties going under offer. These deals have now progressed to the point of exchange, which means we are beginning to see a rise in sales volumes. The number of homes sold in January 2021 was up 4% on January 2020 and 3% higher than the average number of January sales between 2015 and 2019.
Over the last three months (November to January) achieved prices rose 1.8% compared with the same period a year earlier. Taking January in isolation shows a similar increase, up 1.6% in January 2021 compared with January 2020. Houses continue to see higher annual increases in prices than flats. Flats sold in the last three months (November to January) saw achieved prices rise 0.4% compared with the same period a year earlier, this compares to a 5.2% increase for houses.
With significant funding committed to landmark regeneration, Bayswater in W2 is a London neighbourhood primed for growth, given its relative value as a park-side, prime central location.
Central to the regeneration of Bayswater will be the £1.5 billion redevelopment of Whiteleys, London’s first department store. The overhaul of this historic Victorian mall is set to complete in 2023. The Whiteley will comprise 1 million square feet of mixed-use development comprising 139 residences, 20 shops and restaurants, a cinema, gym and a Six Senses hotel with 110 rooms.
As part of the project, the area’s main street, Queensway, will become a retail destination and more pedestrian friendly with wider pavements and less street clutter.
At the other end of Queensway, work is underway at Park Modern where over 50 apartments will be created at the entrance to the park and as part of this project a new entrance into Kensington Gardens will be created. This project will mark the gateway of “Bayswater Village”.
In addition, the arrival of the Elizabeth Line at nearby Paddington will make the area even more accessible. The area also has numerous cycle paths across Hyde Park and Kensington Gardens and is walking distance from Kensington, Notting Hill, Marylebone and Mayfair.