London Property Market

London Property Market

I am lucky to have travelled to many places, but London has long been a favourite place of mine to visit and remains so.

Combining my passion for property with my love of London, I also had the opportunity to study at UCL, where I gained my Bachelor’s degree in Project Management for Construction.

And then onto the London School of Economics (LSE) where I completed my Master’s degree in Finance.

Given my studies and deep interest in property, I’d like to share with you what I see as current property trends in London, which is very interesting from an investment perspective, but also as something of a barometer as to what might happen in the local property market.

London and the UK enjoy a deeply mature property market, and yet, especially given the events of the last year or so, it is still affected by the boom-and-bust cycles, bubbles and shifting trends that markets everywhere are subject to.

The UK capital is still widely regarded as a “safe haven” in property investment terms.

The city’s strong economy, thriving business outlook and job market are often cited as key reasons people choose to buy, live and work there.

Mature markets bounce back

While London’s property sector will face some uncertainty throughout 2021 and into 2022, it has always been a very resilient market.

I’ve witnessed the cycle of economic and political uncertainty in the London property market in recent times.

However, while none of us expected the property sector to have a smooth ride over the last 12-18 months, the shoots of better times are gradually emerging.

Investment in London’s office space, for example, saw healthier volumes at year end 2020.  EG Radius figures for Q4 show completed transactions totalling £3.5bn, almost matching the combined total of the preceding nine months.

Inbound investment abounds

During 2021, my research suggests London’s property market will see foreign investments remaining strong. But domestic homebuyers and investors may look elsewhere.

By 2022, house prices are expected to fall in Greater London, while the rental decline rate should slow, according to reports from the Buy Association.

While investor sentiment and panic saw the stock markets reel, more international investors are turning to property – especially in more mature, established markets like London – as a way of making a longer term, safer investment even allowing for reduced liquidity.

And let’s not forget that during the last two decades, real estate investment has outperformed the stock market by around two to one.

As people rent for longer, look to build-to-rent

COVID-19 altered a lot of people’s property purchase plans. I’ve noted more people in the UK are renting for longer, having temporarily – or permanently – shelved their own purchase plans, as the pandemic decimated jobs, savings and other sources of income.

The private rented sector remains relatively buoyant. While I don’t expect detailed analysis of the impact of the virus on the property sector for a long time, it’s patently obvious that affordability issues, stricter lending criteria and the end of the UK’s furlough (income support for business) schemes will push first-time buyers to delay potential property investment – while shoring up demand for private rented accommodation.

This scenario is certainly not all bad. We’ve seen a rise in the build-to-let sector, and around half of the UK’s build-to-rent homes are in London.

Build to rent properties can take advantage of shifting trends – such as recent research from the Guild of Property Professionals that 21% of people prioritise a rental property with space to work.

Potential tenants in London may be looking to upgrade their quality of life after spending so much time at home. Build-to-rent properties offer more desirable, higher-end, well-located, contemporary accommodation.

There’s always a caveat, of course – be aware foreign investors in UK property now need to pay an additional 2% stamp duty (property tax) surcharge.

Line up your plans

Of course, as the market gets back to some semblance of normality – and it will – we should see a surge of interest in renting (and re-renting) office space.

My research suggests there is a lot of pent-up demand for the ‘right kind of space’ – that is, when companies decide to rent office space, they may be looking for spaces that fulfil different needs compared to pre-pandemic – there’s a different impetus for more creative spaces, with higher quality.

Savvy investors may well buy some of the competitively priced office and commercial stock in London right now, with a view to selling it when the market upswing inevitably comes.

Expect to see a rise in flexible working spaces, especially given uncertainty on the future of homeworking, shared workspaces and ability to meet leasing costs.

The future

The end of lockdown restrictions in England will undoubtedly cast further positivity on the market with domestic property purchases gaining momentum.

The residential rental market is also likely to see demand increase as tenants look to capitalise on rates which in some areas are 20% lower than they were pre-COVID. One thing is for certain, the London property market is never boring!