Property Market Update

If you’ve been reading the headlines about the London property market since the start of Covid-19, there’s a good chance that you noticed the rapid change in sentiment. During the first few months of Covid-19, we were bombarded with headlines that the London property market is crashing and that it will continue to crash as the year goes by with no cure for the infection. These were sensational headlines, claiming that buyers are demanding 20% discounts. Only a few months later, the headlines are now about how real estate prices are at a record high. This post will try to explain why there has been a shift in the market and discuss the predictions that are being reported. 

There is no question that the first few months of lockdown brought the real estate market to a halt. Although there were headlines that claimed this was due to a crashing market with very few transactions, the reality is there were very few transactions because viewings were not allowed, and mortgage lenders were not lending. The only deals that were completing were those that were agreed on prior to the lockdown. At the time, there was very little data to truly understand what was happening with the market, causing uncertainty about the future. Fast forward to May, the market was given the permission by the government to resume activities. 

Summer for the London real estate market is usually quiet, however this year proved to be totally different. Although the UK is currently going through an economic crisis due to the virus, house prices in the UK have hit a record high. In August, prices were 3.7% higher than last year. There are two reasons for this – pent up demand during lockdown and the government giving a stamp duty break on properties up to £500,000. The fact that the market was put on halt for months during lockdown created a large backlog of buyers who were waiting to move. Quarantine also created a new set of buyers who realised that after spending so much time in their home that it no longer fit their needs, with new priorities such as outside space and home offices. International buyers also have an incentive to purchase a property prior to April next year as the government will be introducing a 2% tax surcharge. 

There are some predictions that this strong market activity will be short lived once the pent-up demand fizzles out and when the stamp duty holiday expires next March - the real estate market will then be more in tune with the current state of the rest of the economy. Moreover, there may be a short-term shortage of international buyers once the new stamp duty kicks in. It’s important to note, however, that these predictions are in line with the predictions of economy in general. As I advise all of my clients, any investment in the UK real estate market should be viewed as a long term, safe asset. Knight Frank (one of the leading real estate agencies) currently has predictions that prime central London will be up 17% by 2024.  Naturally, there could be turbulent times ahead, however the chances that London will lose its appeal as one of the best cities in the world is very low. 

If you are interested in purchasing or renting a property in London, I can help you source the right property, in the right location, at the right price. If you would like to schedule a free consultation, please email iyad@iyadgrahne.com