The latest analysis from global real estate expert Savills held firm on its widely accepted positive medium-term London residential forecasts. Despite market pressures arising from the Covid-19 lockdown, and short-term disruptions caused by the pandemic, a number of economic indicators continue to support five-year price predictions of 15.1 per cent growth across the UK. The mainstream residential price forecasts for London is 6 per cent by 2021 and 4 per cent by 2024.

The economic indicators taken into consideration include long term trends such as a low cost of debt, low levels of price growth in the run-up to the crisis, and ongoing government interventions which continue to mitigate the impact of such exogenous economic shocks.

The average interest rates for a 2-year fixed rate 95 per cent loan to value (LTV) mortgage has dropped over the last five-year period from 4.58 per cent in April 2015 to 3.08 per cent in April 2020 according to BSA figures. Moreover, assurance, that these levels are stable, can be drawn from the Bank of England base rate which is at a record low of 0.1 per cent and expected to remain at this position until Q2 in 2022. Hence, Oxford Economics analysis predicts that repayment affordability will be unaffected for those with a stable income, enhancing house price stability.

With GDP expected to bounce back, after short-term falls of up to 8.3 per cent this year, unemployment is similarly expected to rebound to below 4 per cent by 2022 - an employment rate lower than over five years following the Global Financial Crisis of 2008. As such, transactions are expected to return to normal levels in 2021, with momentum driven by pent up demand accumulation that escalates these transactions to previously unseen peaks.

London and the South East are expected to lead the UK’s economic recovery, particularly given that prices in prime central London, for instance, were 19.7 per cent lower than 2014 highs before the Covid-19 crisis. This represents a significant buying opportunity for international buyers, purchasing in foreign currencies, which will be increasingly realised as international travel restrictions ease. 

With mortgage repayment affordability anticipated to be better through to 2024, a robust economic recovery supported by fiscal and monetary stimulus, and growth in buyer demand, the market’s confidence in the UK capital’s residential forecast is likely warranted.