London Residential – Q3 2021
The third quarter of 2021 represented a significant shift in London real estate and the beginning of the real post-pandemic recovery. The easing of international travel restrictions and the return by many to their offices in the City has led to a much needed increase in demand for Zone 1 living space.
Central London residential experienced annual price growth of 0.8% in July, being the highest level since May 2016. Knight Frank predict the Prime Central London (PCL) market to experience growth of 7% next year and 25% cumulatively from 2021 to 2025. PCL rental values rose month on month in July for the first time since the start of the pandemic, spurred on by the return of both office workers and international students. According to Savills, only 20% of new central London tenants in Q3 were from the UK compared to 42% in the same period of 2020.
Data on new homebuilding suggests that the shift of supply-demand dynamics in favour of landlords is likely to continue. While completions on new homes in London have held steady, annualised Molior data suggests the level of starts on larger projects (20 or more units) fell to 15,800 in the year to June 2021, down from 18,900 a year before and the lowest since 2014.
While PCL has seen the most acute shift in sentiment, more space and greenery seems to remain a key domestic buyer requirement and it is expected that Prime Outer London will experience 4% growth in 2022 and 23% cumulatively to 2025. Data collected by Savills indicates that for many, the lifestyle changes brought on by the pandemic are likely to remain permanent leading to sustained demand for quality-of-life commuter locations.
Subject to the re-introduction of lasting Covid restrictions, we expect to see continued growth in the London residential markets as the city emerges from the tailwind of the pandemic (and Brexit).