Bounce back begins
We are pleased to report an improving sales and rental market in the first half of 2021 across central London with each month seeing an increase in demand and transaction numbers, in line with the relaxation of the national lockdown from March. The reopening of the hospitality sector in May reinvigorated the city streets and with it revived interest from prospective buyers and renters.
In the pandemic, Londoners learned how to manage a more open-air lifestyle with the notoriously unreliable British climate, and it looks as though pavement café culture will be here to stay. London will be the richer for it. Sadiq Khan, newly re-elected in May, for a second term as Mayor of London, committed to the city’s recovery as a ‘greener, fairer, safer and more prosperous city’.
While London’s housing market was hard hit by lockdowns, particularly in the central areas, many other parts of the country experienced record levels of activity and price rises to match. Our markets remain firmly pegged back to 2014 prices, making a central London apartment look like good value compared to suburban, home counties or even coastal towns and cities.
The combination of low supply and a pick-up in demand, has resulted in modest price rises this year in Midtown, City and East London, for the first time since 2015. The market is due a recovery and the ingredients are in place: low interest rates; restricted supply; relatively attractive prices and a city poised to be cleaner and greener with the energy of a rebirth.
Buyers showed up to seize the opportunity, but not enough owners felt motivated to sell at current prices, especially when interest rates are so low and many willing vendors were prevented from selling by the requirement to undertake essential fire safety works to their building.
The extension of the stamp duty incentive to 30th June produced a high volume of successful sales completing at the same time across our offices but with the final relaxing of lockdown measures delayed until 19th July it may take until September before demand from new buyers picks up.
The fire safety debacle, which escalated in 2021 despite government pledges, has compounded the low levels of stock on the market as owners find themselves unable to sell as long as they are saddled with unexpected service charges to cover remedial works, inflated insurance premiums and on-site fire wardens. Any block, particularly those built within the last 30 years, can fall foul of the requirements and mortgage lenders will not take the risk.
When sales volumes are low, it is often mirrored by rising supply of rental stock as owners put up homes for rent. Rental values fell across Central London in 2020 and there was another wave of reductions in Q1 2021. Our markets suffered as many of our market stalwarts – overseas students, corporate lets, the annual graduate intake and other well-paid office workers – stayed away from central London. It resulted in unexpected opportunities. People who normally rent in outer London were able to taste the joys of living in the centre of the city at rents normally outside their price range. By Q2, rents were beginning to recover and by the end of the quarter, the gap had narrowed.
Many privileged people have been able to build up capital during the pandemic as their opportunities to spend were severely curtailed. That capital will fund deposits for home buyers and offset the phased reinstatement of stamp duty in Q3 2021. Already we are seeing younger people, in their 20s, coming forward as buyers.
We are optimistic that changes in lifestyle and workstyle wrought by the pandemic, will translate into renewed interest in owning, or renting, a pied a terre amongst people who have relocated their main home base to the countryside. A small apartment within walking distance of office and clients, is often an attractive alternative to staying in a hotel.