London house price forecast:exclusive new figures predict 20% growth looking beyond coronavirus and Brexit to 2025
The rise of suburbanisation and a worsening housing supply crisis mean the capital will lead the UK housing market in the post-pandemic recovery, with Londoners expected to see their house prices rise by a fifth (21 per cent) over the next five years, according to a new forecast, exclusive to Homes & Property.
London is set to outperform the rest of the UK next year with house prices staying flat compared with a national fall (-1.5 per cent), the study by JLL 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 the previously “less fancied” 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 says.
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
The 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 propertymarket, 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 to 30 per cent 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 ,” adds Becky Fatemi, property agent for the mega-rich.
She is selling a five-bedroom house for £24,750,000 on Lennox Gardens, a private residents’ square garden in Knightsbridge.
This type of home seems like another world but there is 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.
“The residents of such homes spend money on retail, leisure, culture, transport and food, benefiting the wider economy,” Fatemi explains. Price rises ripple out, too.
Housing shortage will push up prices
A growing housing shortage will also push up prices as demand outstrips supply. Housebuilders in London have fallen behind during the coronavirus crisis.
“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 — 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 next year.
Property agent Alex Goldstein says Rishi Sunak should have kept his powder dry. “The pent-up demand and need for space in the lockdown was always going drive a mini boom in the housing market. He should have saved the stamp duty for when sales start to taper off, which is beginning to happen now,” he says.
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.
“The combination of the stamp duty holiday with Help to Buy is like giving a child too much sugar. If the Chancellor ends the stamp duty holiday abruptly, activity could crash,” says Fatemi.
Shared ownership boom
Whitten also expects shared ownership to grow in popularity over the next few years due to widespread financial difficulties. The affordable scheme allows you to part-own and part-rent a property.
Antonio Miragliotta, an executive at Not On The High Street, was renting in Twickenham but decided to buy when his landlady had to shield.
Miragliotta, 33, bought in the Staging Post scheme in Hounslow after he realised a shared ownership home was cheaper than renting in Richmond.
He purchased a 25 per cent share of a one-bedroom apartment for £80,625 in the scheme, which has communal gardens. Contact Notting Hill Genesis on 020 3944 686.
Four regeneration zones to buy in now
Whitten pinpoints London’s half-built regeneration zones as the savvy buy over the next year.
“These areas are well-suited to the first-time buyer who wants to see an uplift in the value of their home fairly quickly. They want to stay urban yet, following the lockdown, are looking for proximity to outdoor space, room to work from home and a balcony,” he says.
Other priorities for young buyers include electric car charging points and bicycle storage.
First-time buyers are more likely to want to stay as close to the centre of London as possible, regardless of the Covid-19 crisis, according to JLL.
Thirty-year-old Dominique McRae has bought a 30 per cent share of a two-bedroom apartment in New Garden Quarter in Stratford. She was renting in East Village – the old Athletes’ Village – but a sudden inheritance helped her to buy in zone three.
“I play tennis at the Lee Valley Hockey and Tennis Centre and my local swimming pool is the Olympic pool,” she says.
Homes at New Garden Quarter start at £105,000 for a 25 per cent stake of a one-bedroom apartment. Call 020 3815 1234.
Upton Gardens, formerly West Ham’s home ground, has been converted into 181 new homes with an on-site gym, landscaped gardens that include an art trail, roof terraces, 64 e-charging spaces and room for 1,000 bikes.
Prices start at £365,000, call 0330 057 6666.
An £8bn new second city centre is being carved out of the Royal Docks, once the working heartland of the capital but abandoned after the decline of industry.
Pontoon Reach is a new scheme launching this weekend in the 121-acre regeneration zone.
The 13-storey tower will overlook gardens and cycle paths, with prices for a studio starting at £330,000. Call Redrow on 020 3733 0937.
Crystal Palace in south London has a well-established central community that is made up of traditional terraced housing but it is also undergoing an area upgrade starting with the beatification of Crystal Palace Park.
Homes are available to buy in the 14-unit Palazzo building – a Victorian conversion.
The building has private parking, bike storage, a communal garden and is a short walk from Crystal Palace overground station.