Real estate in London remains one of the most investment-attractive assets in the world. The British capital city attracts residential investors and end-users due to its well-developed infrastructure, strong tourism sector, business opportunities, and high quality of life. Below, we will discuss the way apartment prices in London 2022 have changed, what awaits the local market in the future, and the impact the COVID-19 pandemic has had on it.
- How the COVID-19 pandemic has changed the dynamics of the London property market
- How do real estate laws change
- How much is housing in London
- What will happen to the London real estate market in future?
- Assistance with the purchase of properties in London
Since last summer, when the real estate market in London reopened after the end of the lockdown, the number of transactions has increased significantly. Part of the growth occurred because many transactions that were put on hold due to the pandemic have finally come to an end. Stamp duty holidays also contributed in part to the growth. However, buyers’ activity surpassed all possible expectations. Experts link the market’s rise to the influence of the coronavirus pandemic on people.
In 2021-2022, rapid growth was recorded in all sectors of the real estate market. But it was the increased activity of home buyers that was the most dramatic. There were 142% more mortgages taken out in March 2021 than in the same month of 2020 (before the country went into lockdown).
Since the 2008 global financial crisis, London home buyers’ activity has remained quite low. Mortgage loans only recovered to pre-crisis levels in 2018.
The COVID-19 pandemic has caused a fundamental shift in consumer behavior. It led to the need for larger living spaces during the lockdown. In 2021, families increasingly acquired larger homes in remote areas of London. Many people were willing to exchange proximity to work for more space inside and outside their homes.
Equally important was a shift in employer policies. Amid the pandemic, many companies adapted to the conditions, and their staff began to work remotely. This was an additional reason why people who worked in the London labor market moved to districts considered too remote for daily trips before COVID-19.
Changes in property prices in London matched the growing activity of buyers. The rise went hand in hand with changes in British law:
- The Building Safety Act 2022. The Act received royal assent and came into force on April 28, 2022. It is a response to gaps in legislation on the safety of buildings exposed following the Grenfell Tower fire on June 14, 2017. The law introduces new standards that all parties involved in the operation of housing (developers, landlords, etc.) have to comply with.
- The Leasehold Reform (Ground Rent) Act 2022. As of July 30, 2022, ground rent payments have become prohibited for most residential buildings. This measure significantly lowered homeowners’ expenses.
The latest information by the HM Land Registry shows that the average home price in London rose by 1.1%, or £5,695 (to £543,517) in July 2022 compared to the previous month. In July, local housing prices increased in 28 of London’s 34 boroughs.
The highest average growth occurred in the following districts:
- Hammersmith and Fulham – by £42,800 (5.6%)
- Harrow – £22,920 (4.4%)
- Brent – by £17,120 (3.3%)
The lowest average price drop per housing unit occurred in the following areas:
- Kensington and Chelsea – £36,000 (2.6%)
- The City of London – by £26,000 (3.1%)
- Richmond upon Thames – by £14,300 (1.9%)
Average house prices in London are about £543,517. This is 74%, or £231,934 higher than the average home price in England. The cost of London properties has grown by 9.2% over the past twelve months. The same indicator for England was 16.4% for the same period.
At present, 2022 remains a strong year for the real estate market. Experts agree that average prices for houses in London will rise by 5% on an annual basis in the last quarter. Forecasts for 2023 are still uncertain. The movement of interest rates is extremely significant. Some predict that the base rate will peak at roughly 2.5% in the first half of 2023 before dipping a little in the first half of 2024.
Taking into consideration the pressure on household incomes, in 2023 we can expect a sales decline in the local property market in general. The transaction volume will likely return to the level of 2013-2014. However, the market will bounce back in 2024 alongside falling interest rates and pent-up demand. By the end of 2024, property prices will increase by 2% in the whole country. Housing prices in London are expected to rise ahead of this indicator.
2025 could be the start of a new cycle as the base rate will return to its normal levels. It will probably be around 1.75%. Property values will go up by about 3% in the UK. In London, this figure will reach 5%.
Over the next few years, the strongest price increases will be seen in central London, at around 15.5% over four years. The average rent will increase by 5% at an annual rate in 2023 and 2024 across the whole country.
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