QIB-UK, based in the heart of London’s Mayfair district, provides expert insight into the property market in the UK and London in particular, which remains one of the top international destinations for Qatari nationals.
London’s premier sales market is in an ideal location. Demand in the capital has recovered from the depths of the pandemic as the “flight home” trend subsides and the UK economy recovers. The number of potential new buyers registered in London last month was the third highest figure in a decade, according to data from Knight Frank. Meanwhile, supply is finally picking up as economic warnings mount, mortgage rates climb and homeowners feel prices could peak. Underscoring this, the number of new sell instructions in May was the sixth highest figure in a decade, according to data from Knight Frank.
With high demand and supply, the inevitable result is more transactions. Indeed, the number of offers accepted in May was the highest monthly figure in a decade. The pattern is broadly similar in Prime Central (PCL) and Outer London (POL), with both areas recording a ten-year high for offers accepted. Although there is a lag before sales figures also rise, May was the tenth strongest month in a decade for trade when the impact of stamp duty holidays is removed.
“The stars are aligning for buyers and sellers in the London property market, with supply increasingly able to keep pace with robust demand,” said Tom Bill, head of residential research in the UK. United at Knight Frank. “For those wondering when this period of strong activity will end, it will likely last longer in Zone 1 due to the recession-proof qualities of Prime Central London (PCL) and the fact that a longer-term recovery is In progress.”
Prices in Prime Central (PCL) and Outer London (POL) are increasingly following different paths. Indeed, we expect prices in Prime Central London (PCL) to outperform most other UK markets over the next five years. Prime Central London (PCL) is in recovery mode after seven sluggish years caused by tax hikes and political uncertainty. International buyers, who have yet to return in significant numbers, will only accelerate this trend, especially in light of the recent decline in the pound sterling. Meanwhile, quarterly growth in Prime Outer London (POL) fell for the third consecutive month in May, with the space race becoming slightly less frantic and rising mortgage rates and rising costs of living making ravages.
Prices in Prime Central London (PCL) rose 2.4% in the year to May, the highest annual growth rate since April 2015. In Prime Outer London (POL), prices rose 4.8% over the 12-month period, which was also the highest annual growth rate in more than seven years. Underlining the possibility of recovery, prices in Prime Central London (PCL) are still 15.3% below their last high in August 2015, while prices in Prime Outer London (POL) remain 7% lower, 8% at their last peak in July 2016.
Meanwhile, in the rental market, a period of frustration for renters is expected to continue this summer. As supply and demand rebalance in the sales market, the number of properties available for rental remains low compared to demand in London and the Home Counties. However, there are warning signs that supply may slowly resume. In May, the number of market valuations (a leading indicator of demand) was the tenth highest figure in a decade. One of the reasons for this increase is that more and more owners are renting out their property after failing to achieve the desired price in the sales market. Price growth in Prime Outer London (POL) appears to be slowing as the space race subsides and is only increasing steadily in Prime Central London (PCL) as the number of overseas buyers is not not yet back to pre-Covid levels.
Another cause is higher tenant turnover as more and more workers change jobs or leave the UK altogether. One in five workers are likely to leave their jobs in the next 12 months in search of better pay and a greater sense of fulfillment, according to a recent global survey by accountant PWC.
Meanwhile, more landlords are tempted to return to the market due to rising rents, a trend that would also support demand, as we explore in more detail here. Average rental values in Prime Central London (PCL) rose 29.1% in the year to May. The rise was smaller than in April, suggesting that recent strong increases have peaked. Rental values fell sharply at the start of 2021 as staycation restrictions caused an influx of short-term properties into the long-term rental market, driving down rents.