The London Market

London was once again the weakest performing region in Q2, although growth remained very strong compared to pre-pandemic levels. Annual growth fell from 7.4% in Q1 to 6.0% and homes in the capital remain by far the most expensive in the UK, the average London price is now £540,000 roughly 60% above the outer South East – the next highest region. This is one of the reasons that price growth is slower. House prices relative to incomes are so high that buyers reliant on mortgage finance are limited in how much they can stretch borrowing to put upward pressure on pricing.

Overall, we expect activity in London to remain strong relative to pre-pandemic levels over Q3 but begin to slow meaningfully later in the quarter and into Q4. The June RICS Residential Market Survey showed that London was one of only three regions that saw increasing new buyer enquiries and a positive net balance of surveyors also expect to see price rises in the capital over the next three months.

The relative strength in of opinion around London’s near-term prospects contrasts to what we saw for much of the period following the pandemic and reflects a continuation of returning demand for urban housing.

London will likely continue benefit from the sustained return to office we are now witnessing along with eased international travel. The prime central markets are particularly well placed to benefit from increased ease of travel as they have a more international buyer pool. They are also less reliant on buyers using mortgage finance which leaves them less exposed to interest rate rises. Consequently, we expect prime central London to outperform the wider London market.