The proverbial black swan event that is Covid-19 has come to symbolise immense economic turmoil and uncertainty. Combined with newly reignited Brexit tensions ahead of the December 2020 transition deadline, and the volatility induced by the run-up to the November 2020 US election, the impact the pandemic has had globally is ongoing and difficult to predict. Despite this mixture of interrelated complex phenomena, the UK property market is strengthening, as investors clamour for reliable assets capable of providing hedging positions to offset risk.
London sits at the heart of this recovery, with three central pillars underpinning growing demand: momentum, adaptability and stability.
August data from Nationwide demonstrating 16-year highs in monthly house price growth, alongside increases in Bank of England mortgage approval data, as well as significant elevations in market activity, are indicative of substantial surges in momentum.
In Prime Central London (PCL), the number of £1 million + property sales recorded across June, July and August jumped 35 per cent, 98 per cent and 116 per cent respectively, relative to the same period last year, based on aggregated data from all major listings websites captured by TwentyCi. The August total in offers accepted was the highest monthly figure in 20 years with Wimbledon, Islington and Wandsworth emerging as the top performers in price growth.
The adaptability that the property market has demonstrated has also been remarkable. At the governmental level, policy instruments such as the stamp duty holiday and the furlough scheme have bolstered demand. Whilst, from a liquidity perspective, credit markets have remained accessible post-lockdown with buyers and sellers able to take advantage of historically low-interest rates. Undoubtedly, lessons learned in the 2008/09 global financial crisis have better enabled the expediency of such measures being put in place. Structural outcomes, such as the Banks being sufficiently capitalised to withstand another recession, have buoyed the property market’s resilience.
Finally, analysis of market fundamentals alludes to the ongoing stability of the UK property market from several vantage points. A Knight Frank report forecasts PCL cumulative growth from 2020 to 2024 of 17 per cent set against a backdrop of 14 per cent growth across the UK. London’s prospects are supported by significant infrastructure investments such as Crossrail, its primacy as a global financial capital, as well as its history of delivering stable returns.
Fitch ratings predict that the GDP of the world’s major economies will remain 3-4 per cent lower than pre-pandemic predictions through to 2025. As such investors, from overseas in particular, will continue to gravitate towards prime property investments benefiting from the UK property market’s robust momentum, adaptability and stability.
We expect prime London markets to outperform over the course of the next five years. Prices in prime central London have corrected by more than any other UK market over the last five years and we expect this to support growth in the medium term, said Knight Frank.