London Residential – Q1 2022
Following the record-breaking performance across UK property in Q4 2021, growth rates appear to have cooled off slightly nationwide but performance in London looks positive.
According to JLL, rents in London rose by 1.1% in Q1 2022, down from a 3.7% quarterly rise at the end of last year but up year on year. The picture is similar in the sales market, with demand across London’s core market outperforming Q1 2021. According to Savills, London price growth is starting to match the country after two years of underperforming – while domestic demand continues in commuter belts, central markets are catching up as workers return to their desks. Prices for London flats increased by 1.4% in the opening quarter of the year, the highest increase since the start of the pandemic and against a backdrop of a 1% increase for the rest of the country. The link to the City is clear as markets such as Canary Wharf, Shoreditch and Islington recorded growth of 3.7%, 3.4% and 3.3% respectively. Institutional demand has certaintly played its part, with build-to-rent investment in the UK up 50% versus Q1 2021, the majority of which is London based.
Prime outer Lonodon has also performed well in the quarter as there continues to be unmet demand for those looking to upsize. Richmond and Primrose Hill for example are up 9.1% and 8.1% on the year respectively.
While some commentators have suggested that soaring inflation and rising interest rates could lead to darker days ahead, pricing and supply levels indicate further growth in the medium term. Prices in London are still currently 8% below their 2014 peak, with prime central being as much as 18% below such level. Although supply in the housing market is building, it continues to be outpaced by demand – the ratio of new prospective buyers to new instructions climbed to 18.2 in January 2022 from 10.4 in December, representing the highest ratio in nine years. In the prime London market, the number of new prospective buyers was 72% above the five-year average in January while the number of sales instructions was down by 12%. There is also the return of international buyers to the London market to consider, with many foreign investors having paused to reflect on the situation in Ukraine or otherwise been tied up as the pandemic continues to rear its head.
While the impacts of inflation and the situation in Ukraine mean we are unlikely to see growth levels experienced in 2021, the first quarter of 2022 suggests there is room for further growth in the capital.
https://www.jll.co.uk/en/newsroom/uk-build-to-rent-investment-surges-50–in-q1-2022-https://content.knightfrank.com/research/78/documents/en/the-london-review-q1-2022-8766.pdf
https://www.knightfrank.com/research/article/2022-02-18-supply-continues-to-lag-demand-in-first-month-of-2022
https://www.gov.uk/government/statistics/uk-house-price-index-for-february-2022/uk-house-price-index-summary-february-2022