Sales Market – Year End 2021

By on Thursday, January 20th, 2022 in Lettings, Market Trends, Research, Sales.

Supply Shortages

The price of a one bed apartment is broadly the same at the end of 2021 as it was in 2013 and that is true in City, Midtown and East London.  While investors might not find that a very appetising statistic at first glance, gross yields during that period have run at between 4% and 5%, well above any return available from capital held in a savings account. For anyone minded to buy, price is less of a barrier than it has been for many years. 

The biggest hurdle for prospective buyers in the current market, is the lack of stock. There are very few options available and the continuing problems with cladding and more general fire safety works, is a major contributory factor.  As long as mortgage lenders and surveyors insist that the bulk of purpose built apartments require an EWS1, whether they are genuinely at risk or not, then the flow of new properties for sale will be stemmed.  

In this market, even when the overseas buyers had retreated and domestic investors all but disappeared altogether, prices did not drop because buyers had so little choice and the small volume of stock on the market still attracted competition. At the same time house prices in the suburbs and across the UK boomed in 2021, with some regions experiencing price increases of as much as 20%. Central London now offers an affordable option when compared to many popular locations in the home counties and along the south coast.  

In East London there was a modest uptick in the average price of a one bedroom apartment in 2021. In general however, interest focussed on larger properties as people sought more space to work from home. That has narrowed the price differential slightly between East London and our more central markets of City and Midtown. 

The successive price falls triggered by the last round of stamp duty rises in 2016 have been steadied and vendors are able to stand by their asking prices – although many still baulk at the prospect of selling at a price they could have secured in 2013.

Sales Market – Year End 2021

The analysis in Table 2, which looks separately by size of property in each of our three markets, highlights some key differences. While there has been very little price movement overall, larger properties have experienced significant price growth of between 6% and 8% over the past 12 months. Buyers have been competing to secure an extra bedroom or living space. In the past, three bedroom properties have been the least in demand but that position shifted during the pandemic. The same drive for space accounts for the small uplift in prices for all properties in East London, where buyers will get more space for their money. Pre-pandemic, a typical buyer would sacrifice space in order to live in the heart of the City, those rules changed when the City, its workplaces and leisure attractions all emptied out.

Sales Market – Year End 2021

Our offices completed a record number of sales of homes at above £1.5 million in 2021. This is also the first time since the new SDLT banding was introduced in 2014 (which hit homes over £937,000), that we have recorded price increases for higher value homes. Terraces, gardens and home offices were all highly sought-after and were key to driving up values. 

Sales Market – Year End 2021

It’s also worth noting that stamp duty has not deterred second home buyers outside of London either. We understand that the number of second homes purchased outside the capital rose by 80% in 2021 and a quarter of Stamp Duty receipts were generated from homes that attracted the 3% second home levy.  

The old adage that property investment is all about timing, is starkly evident in the Table 3 showing long run capital growth. A home purchased in Midtown in 2007, has risen in value by 23% but the same home purchased a year later, after the Global Financial crisis, would be worth 35% more today. In the same way, a comparison between the period 2015-2021 and 2013-2021, reflects the rise and fall of values over that time. City and East London prices are now higher than the 2013 base because there has been some narrowing of the price differential as these areas have gained popularity as places to live.

Sales Market – Year End 2021

We have been operating in these markets for over a quarter of a century and we have watched them evolve and mature as lively, mixed-use urban neighbourhoods where people work, live and socialise. When the Mayor of Paris talks about creating a ’15 minute City’, where people can meet all their needs within 15 minutes, we see that our markets developed that way organically. The differences in the long run growth rates reflect the pace and maturity of that evolution, which occurred more recently in City and East London. 

In November 2021, the UK hosted COP 26 in Glasgow, bringing together world leaders to discuss how to tackle the impact of climate change.  It raised awareness of energy consumption and sustainability and the role of our homes in generating carbon. By the end of 2021, our sales teams were reporting that younger buyers had started to request sight of EPCs.  We see this becoming an established trend in the housing market as the quest for zero carbon goes mainstream. 

Sales Market – Year End 2021
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