London property seems to be regaining its lustre
The London property market is once again driving national house price growth in a major way.
Demand for property in London has returned to pre-pandemic levels.
But let's be clear
At the start of the pandemic, working from home caused an urban exodus to the suburbs, the idea of leaving London and other cities for a new life in the countryside attracted many.
Buyers were looking for bigger houses in which to live and work, as well as gardens and easy access to the coast and the countryside.
Today things are very different. Commuters are returning to London and the UK, as never before, is finally open for business again.
People have discovered the need to spend more time in the office again. A place not only where people work but where they have social relationships, a place where they can express their potential. The initial enthusiasm for staying at home was soon subverted by increasing loneliness and a dramatic reduction in interpersonal relationships.
Commuting became again an important factor in their housing thinking.
Areas with larger homes and gardens close to central London have recently seen demand grow as never before, especially those areas called the 'wealth corridors' that run north through Islington and St John's Wood to Highgate; from Fulham and Clapham to Wimbledon; and the emerging corridor from Ealing to Chiswick.
Savills reports that properties with five or more bedrooms in prime areas of south-west and west London have increased by 7.3%.
Back and forth
Knight Frank data reveals that the number of buyers moving from the city to the suburbs peaked in January 2021 and has been declining ever since.
During the pandemic, flats have lost popularity and value in many UK cities.
According to research by the Office for National Statistics, flats have failed to keep pace with the rise in prices of detached and semi-detached houses in the period since January 2020.
House price growth also suffered in London during the first year of the pandemic, but not as much as previously thought.
According to ONS data, property prices in London increased by "only" 5.1%.
London has enjoyed incredible property price growth over the last 30 years and 5% growth in London was still a reasonable return on an investment.
London's resilience is there for all to see - the average property price in London in 1991 was around £75,000.
Today it is £493,400, according to Zoopla.
This is an increase of over 500% in just three decades.
Knight Frank predicts that the central London market will outperform all others in the UK by 2025, with a cumulative growth of 25%.
However, London could face a shortage of new housing supply in prime locations.
In the first three quarters of 2021 there were 352 transactions in the UK capital of properties from £5m upwards, compared to just 348 in the whole of 2020, according to Savills.
London rents also slumped during the pandemic, dropping as much as 10% at one point, according to Zoopla. But again, rents are rising as tenants in London return to pre-pandemic levels.
Foreign investors are returning to the UK property market
Foreign buyers are also preparing to return to the market and mainly in prime real estate areas such as Chelsea, Kensington and Belgravia.
London's credentials as a safe investment remain. The fundamentals that have underpinned demand for central London over the past 25 years are still the same. London looks set for an explosion of growth.
A new London commuter belt emerges
Sales have exploded across the country. The average property in the UK is now £235,000 - £17,500 more expensive than before March 2020, according to Zoopla.
For those commuting from London but still wanting easy access to the capital, many are settling in the regional urban markets of Oxford, Bristol, Bath, Cheltenham, Winchester and Cambridge. A new commuter belt extends well beyond London's suburbs.
For those leaving London looking for a less dramatic lifestyle change but a more affordable commute, there has been a real renaissance in the last six months of these 'uber-towns' with their space and greenery, great accessibility and all the urban facilities according to Savills.
Sales of £1m+ properties have also increased outside London. While London is still home to a significant portion of the prime market, there is now a wider geographic spread of sought-after luxury properties.
The fundamentals for London have remained strong. The UK capital has always been a property hotspot for global high-net-worth individuals.
With international buyers returning, a mismatch in supply and demand is being created, continuing to support future growth.
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