Regional cities and the country outperform London by a wide margin. Outer London areas stronger than prime central London and City
Real estate participants are uncertain about the course of the UK and global stock markets and the impact this will have on property values. Photo: Bloomberg
London:- THE residential property market in the United Kingdom has taken agents and analysts by surprise during the lengthy pandemic.
Regardless what agents and economists opine, their 2022 predictions for the sector can, at best, be regarded as guesswork.
The number of variables has multiplied in tandem with Covid-19 variants.
They include the shift towards working-from-home and a growing trend of people moving out from pricey apartments in central London and other major cities to houses in the suburbs and villages.
There is also a shortage of quality properties and new projects, not to mention how inflation is denting income and affordability and causing mortgage rates to rise.
Observers say the ongoing pandemic has also seen international demand for UK property fall sharply due to travel restrictions and the fall-out from Brexit.
Following a bull market that has lasted for over a decade, real estate participants are uncertain about the course of the UK and global stock markets and the impact this will have on property values.
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Delve deeply into reasons for mixed price performance
A superficial examination of official UK residential property sales shows that the UK has experienced a remarkable boom.
Average UK prices rose by 14.8 per cent between March 2020 and October 2021 to £285,000 ($382,000).
A deeper analysis shows that cheaper houses and apartments in regional cities and the country have outperformed London by a wide margin.
It shows that the pandemic flight from the capital boosted prices of previously unknown village properties to the £1 million-plus levels observed in the heart of London.
Then there are other cities such as Liverpool where average prices soared by 27 per cent to £171,000; Oxford by 15.5 per cent to £457,000; Manchester by 14.7 per cent to £212,000; and Cambridge by 13.4 per cent to £413,000.
The regional countryside, with houses near railway stations and the coast, have also experienced heady gains over the past year or so.
Greater, more distant London performing better than central and city prime properties
In contrast, London’s price performance was mixed. Between March 2020 and October 2021, the wider Greater London area outperformed prime central London with high percentage gains.
The average prices of homes in fashionable Richmond, with its large detached houses and gardens soared by 22.5 per cent to £776,000.
Over in Bromley, where British teenage tennis star Emma Raducanu lives, average prices were up by 11.6 per cent to £480,000.
In contrast, properties in Westminster were down by 7.5 per cent to an average of just over £1 million, Camden fell by 9.2 per cent to £801,000, while Kensington and Chelsea’s average only managed to creep up by 2 per cent to £1.42 million.
Forecasts mildly optimistic
Simon Rubinsohn, the chief economist at the Royal Institute of Chartered Surveyors, noted that two thirds of surveyor respondents expect average UK prices to rise by 4 per cent next year.
“A lack of stock is driving competition between prospective buyers, which is pushing house prices higher,” he said.
“A net balance of 71 per cent of (survey) participants cited an increase in prices. The feedback points to house price inflation remaining very consistent over the past 4 months.”
“Looking ahead, prices are expected to continue to drift higher at the national level, as a net balance of 66 per cent of respondents envisage prices increasing over the next year and a net 48 per cent expect rent rises.”
Rentals improving as tenants move back to cities
Both Knight Frank and Savills say that after declining during the pandemic, London rentals are on the way up again. They expect both prices and rents to continue to increase in the coming 12 months, assuming the pandemic subsides. Consultants from Property Vision, a firm that advises buyers, are concerned about “empty” new-build high rise apartments such as Nine Elms in Battersea, in South London. Investors from China and other parts of Asia are owners of flats in the building that overlooks the Thames.
London International Market quieter because of Covid, Brexit and living costs
Also, since the London international market is quieter, sellers are relying on local first-time buyers who are finding it difficult to afford expensive London apartments.
“One of the problems with ‘affordability’ is that most people focus only on the interest rate – and ignore the repayments that are now the lion’s share of any mortgage payer’s monthly bill,” said executives from Property Vision.
“If living costs rise in a stagflation environment, it is hard to see how property price inflation will match the rise in the cost of living. As Zoom has come of age, distance has shrunk. It is still the country house market that is making the running for all the same reasons as it has for the last 18 months.”
© copyright Neil Behrmann.(https://neilbehrmann.net) This article was first published in The Business Times Singapore . For other Asian and global articles try https://subscribe.sph.com.sg/publications-bt/