With interest rates at a near 15-year peak, continued cost-of-living pressures and concerns around a potential UK & global recessions, it would be fair to suggest that Prime Central London (PCL) property prices are going to come under severe pressure in the coming months.
In this post we explain why we don’t believe that will be case, and in fact we expect PCL property values to out-perform Greater London and the rest of the UK over the next 12 months.
Limited Supply:
PCL locations offer very limited space for new development and are hugely restricted/delayed due to strict planning regulations and a focus on preserving historical architecture. As a result, the supply of good quality new homes in central London remains constrained which provides upwards pricing pressure. According to CBRE, in PCL the new build market has experienced an especially pronounced decline in planning activity. From 2018-2022, applications, permissions and construction starts all decreased by more than 50%, compared with the preceding five-year period. Notably, 2022 saw the lowest-ever recorded total of applications and permissions granted in PCL.
Home Equity:
In 2023 YTD, over 70% of residential transactions in PCL have involved cash purchasers, fuelled by overseas investment. This is combined with PCL postcodes having the highest proportion of homes owned outright (no mortgage) anywhere in the UK. This is clearly a very fortunate position for these home owners to be in, however it almost entirely removes the financial pressures created from re-mortgaging at higher rates, as well creating a unique market where wealthy sellers only accept deals that suit them, as opposed to other parts of the UK where sellers will likely be forced to accept lower offers due to financial stress. This will lead to PCL values remaining strong whilst other locations see value decline.
Education:
Central London is home to some of the most well regarded universities and business schools like Imperial College, LSE, Kings College and UCL – these are extremely popular with UK & overseas students and remain one of the key drivers for wealthy families purchasing property in the capital. The properties provide a safe and secure environment for their children to live while studying in London, and double up as a sound long term investment.
Lifestyle:
Prime London areas offer a luxurious and vibrant lifestyle with access to high-end retail, fine dining, cultural experiences, and green spaces. The exclusive amenities and quality of life in these prized neighborhoods continue to drive international demand for London’s most premium postcodes.
Safe Haven:
The UK has a stable political environment, a well-established legal system, and a strong respect for property rights. These factors contribute to a sense of security for investors, as they know their investments are less likely to be subjected to sudden and drastic changes. The British Pound (GBP) is one of the world’s major reserve currencies. While it can fluctuate, it’s generally considered stable compared to some other currencies. This stability is attractive to investors who want to protect their wealth from currency depreciation.
Global Financial Centre:
London’s status as a global financial centre attracts a substantial number of high-income earners and executives seeking luxury properties. The concentration of corporate headquarters and financial institutions in the city sustains demand for prime housing.
If you require specialist assistance in purchasing or renting a home in London, please contact our London Property Finder team directly https://ridgestoneproperty.com/contact/
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