The year began with a sense of optimism in our markets which was stifled as the year progressed. The pandemic had a surprisingly little direct effect on sales but it was fire safety issue in the end which shaped the market for 2020, creating a virtual impasse as mortgage finance became impossible to secure on the vast majority of apartment sales built over the last 30 years.
On 8th July the Chancellor announced a Stamp Duty holiday running through to 31st March 2021 waiving the charge on the first £500,000 of any home purchase saving buyers up to £15,000. This provided additional impetus to the housing market which had already shown positive signs of a rebound following the relaxing of the first national lockdown in May.
While central London did not witness the increase in transactions experienced by other parts of the UK we ended the year having sold a similar number of homes as 2019 in a remarkable bounce back across the housing market. This flew in the face of many economists’ predictions that the housing market would collapse due to economic difficulties which in itself showed a lack of understanding that property prices at least in central London had been on a downward spiral since 2015. Over the past 5 years Brexit influenced a lot of people who would normally have purchased a London home more cautious. In 2020 Covid made buyers more determined to move forward with their future housing requirements as they threw of Brexit concerns to secure new homes.
With the surge in house sales nationally the infrastructure that supports buying and selling was under enormous strain not helped by volume low cost conveyancers who are ill equipped and often understaffed to handle leasehold transactions. The reopening of the housing market in late spring and early summer caused a frenzy of pent up demand fuelled by the Stamp Duty deadline.
Buyers registering in our offices typically work in finance, law or tech and have not been affected by the financial distress felt by so many in other parts of the country. The barrier for them is choice – there is very little stock available to buy. In our experience, six out of ten properties we were asked to value, were in blocks where an EWS1 form is required but not yet available. Initially the process was applied to homes in blocks over 18 m high (or 6 storeys) but in January 2020 the guidance was expanded to include low rise blocks too.
Prices had fallen since 2015 and overall they stabilised in 2020 – although there were small differences with one beds losing value while larger apartments, with space to work from home, or outside spaces, appreciated. There was a notable focus on larger homes over £1 million where our offices sold a record number of properties in the 12 months to December. Across the market, transaction volumes held up and prices were sustained at 2019 levels.
Two bedroom apartments maintained their value in 2020 and the price of a 3 bedroom apartment rose over the year in both City 4% and Midtown by 6%, taking the purchase price to around £1.7 million.
Our analysis of pricing for a one bed apartment in the resale market, takes an average across City, Midtown and East London, and is a good indicator of the tone of the market. It records a progressive decline in value over the past 4 years amounting to a fall of £95,000 or 17% from the 2016 peak of £555,000. Today’s averaged price would be £460,000 and it lost £15,000 over the course of 2020.
The demand for a pied a terre all but disappeared this year while the rental market, which drives investor behaviour, has been stronger for apartments with space to work from home, so has favoured larger properties, especially as affordability has improved.
It is very clear that owning a property in central London is more affordable now than it has been for several years and that will attract a new audience of city buyers. As long as London retains its position as one of the world’s great global cities, there will be a desire, from home and overseas, to own a piece of its real estate.
A pied a terre can double as a space to work and meet business contacts and a base for people who take the decision to make their main home away from the city but still have commitments in the city 3 or 4 days a week.
The longer history of price growth remains robust. Prices have more than doubled over 20 years. The City has experienced the strongest growth over the longer timescale. It has been transformed over the past two decades from a purely office environment which effectively closed in the evenings and at weekends, into a vibrant mixed community with retail, office and residential co-existing with internationally recognised modern architecture, in what has become one of the most visually exciting areas of London.
The removal of a no deal Brexit should provide confidence to both domestic and overseas buyers.