At the end of June we saw the deadline for the government’s Stamp Duty holiday which is now being tapered down until it is phased out completely at the end of September. And I am sure many homebuyers are wondering what effect this will have on the London property market. But this is just one of the factors influencing the residential property market in London so let’s take a look at the broader picture.
Looking beyond the Stamp Duty holiday
Of course, the Stamp Duty holiday has had a major influence on the UK property market which has outperformed all expectations in recent months, with house prices across the country reaching record highs. The average price of a home in London in May was £497,948, around £7,000 below March’s record of £504,384, but still £17,000 above the level at the start of the pandemic in March 2020. And there is no doubt that the holiday contributed to the outstanding performance of the UK property market. But it was only one of the driving factors.
In London, the property market has not experienced a surge in demand to the same extent as other parts of the UK, with transaction levels remaining steadier and the gradual tapering of the scheme should ensure that there is little or no negative impact.
As a result, we expect demand to remain consistent, and in fact, for momentum to build over the next few months due to other influences.
Lockdowns prompt a shift in priorities
Homebuyers’ changing requirements have also been a real catalyst in the buoyant London property market. We have been spending much more time at home over the last 18 months, making us appreciate just how important our home is. In particular, we crave more space – inside and out – as our homes become somewhere we can both live and work – and this has become a driving force in what we are looking for in our perfect home.
In fact, space is now often more important than traditional requirements such as proximity to public transport and this is prompting some people to move further out where this space is more affordable than in central London.
New ways of living – and working
While there is always a lull in demand over the summer months, as people take their annual holidays – at home this year if not abroad – we expect enquiry levels to continue to grow as we move towards autumn, with strong activity prompted by workers returning to their offices (at least part time) and maybe considering a new area to call home. We will see this trend continue as we all start to adapt to new ways of working – and living.
Meanwhile, as travel restrictions ease, international buyers are considering a move back to London and perhaps buying a home rather than renting. Of course, some of these will be executives moving to the UK capital as they are on secondment with their firms, while we are also seeing growing numbers of BNO passport holders from Hong Kong seeking a permanent move to the UK.
Financial incentives influencing the London property market
Increased demand has also been prompted by incentives such as the government’s 95% mortgage scheme, together with historically low interest rates. While for overseas investors the weakness of sterling is probably the key driving force, bringing significant cost savings.
In addition, many potential homebuyers have been saving significant amounts of money during the recent lockdowns. Those who have remained employed have had nowhere to go and not much to spend their money on! The Bank of England estimates the amount saved by individuals could be as much as £100bn. This gives buyers a substantial deposit for either their first property or their next move up the ladder.
Shortages of good properties across London
And of course, a continuing shortage of properties in London and the UK generally contributes to the strength of the property market, keeping house prices buoyant. The government says we need 300,000 new homes a year to meet demand yet on average we build only 250,000 – so demand continues to outstrip supply across the country.
Larger homes being snapped up in Hampstead and Highgate
Areas like Hampstead and Highgate are extremely popular and we’ve seen many corporate executives relocating to London with their families, thanks to the outstanding schools in both areas. This year is no exception and the Hampstead residential property market is changing quickly. We have been receiving a lot of instructions recently and these are selling well. In particular, larger family homes (three/four bedrooms) are being snapped up by the domestic market, families mostly, who are keen to move to the area before the start of the September school term. Some of these buyers have down-sized from central London homes and prefer the extra space they can get within their budgets and of course, being near the Heath is a real bonus.
We desperately need more stock so if you are thinking about selling your property in Hampstead, please get in touch with our Hampstead Sales branch to arrange a free market appraisal of your property.
Read more comment from Benham and Reeves in the national press
If you’re interested in the London residential property market you won’t want to miss our regular market comments in the national press. Our director, Marc von Grundherr, gives regular interviews to national newspapers including the Times, The Guardian, the Evening Standard and City AM, giving his perspective on the latest property news and trends. One of the most recent is his contribution to an article in The Times about investing in a property along the route of The Elizabeth Line (Crossrail), outlining Marc’s own experience of investing at The Green Quarter in Southall.
And of course, you’ll also find plenty of interesting articles by going to our News area where you can see recent press coverage.
Are you planning to buy or sell a London property soon?
If you are planning to buy a property in London soon, or if you plan to put your current property on the market for sale, please get in touch with our sales team to discuss your requirements or arrange a free market appraisal.
View all posts by Philip Lingard