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London Residential ReviewQ1 2021
Prices fall in 2020 Lettings imbalance persists
Latest five-year forecasts
https://www.knightfrank.com/research
1 Annual growth in prime central London vs prime outer Londonn POL n PCL
Source: Knight Frank Research
4.3% Annual price fall in prime central
London during 2020
3.2% Annual price fall in prime outer London
during 2020
3% Forecast increase in prime central
London prices in 2021, with price
growth in the Greater London area
expected to be 1%
P R I M E LO N D O N SA L E S M A R K E T I N S I G H T Sales market finishes down in 2020 but 2021 should deliver a return to price growth as the economy opens up
With England in a third national
lockdown, assessing how short-term
sentiment will change in the capital
remains complex.
While some form of lockdown may
remain in place into Q2, any evidence
that the vaccination programme is
limiting the impact of Covid-19 may
begin to encourage more activity in
the market.
In the first three weeks of January,
prospective buyers registering in
London remained 17% ahead of the
five-year average, demonstrating
appetite to buy remains.
Yet there has been a subtle shift
in sentiment, with the prospect of
more sellers holding off due to Covid-
related uncertainty during the first
weeks of 2021. This pent up supply
saw appraisals for sale in London
trailing the five-year average by more
than a third in January. As a result of
these developments we have revised
our forecast (see London and UK Price
Forecast on page 6).
The London property market was
shaped by the search for space during
2020 and restrictions on international
travel. This played to prime outer
London’s (POL) strengths and
disproportionately curbed demand
prime central London (PCL).
It also saw the annual price change
in PCL and POL reach its widest
point in 2020 during December, with
average prices in PCL down 4.3%
during 2020, while the annual decline
in POL was 3.2% (see fig. 1).
Uncertainty ahead of the Brexit
deal signed late last month also
played its part. The number of
viewings in the week to 12 December
in PCL was 11% below the five-year
average, while in POL the figure was
27% above the five-year average.
Overall, the relatively muted
price performance since the market
re-opened in May underscores how
the release of pent-up demand has
been balanced by fragile economic
sentiment.
However, momentum is building
in higher-value markets across
London, which has been particularly
notable between £5 million and £10
million (see fig. 2).
The increase reflects growing
demand for houses, which tend to be
more numerous in this price bracket
and more in-demand among domestic
buyers.
"Overall, the relatively muted price performance
since the market re-opened in May underscores how the release of pent-up demand
has been balanced by fragile economic sentiment."
TOM BILL
HEAD OF UK RESIDENTIAL RESEARCH
-6%
-5%
-4%
-3%
-2%
-1%
0%
Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20
2 Sales jump between £5m-£10mMay to December 2020 vs same period in 2019, % change
in sales volumes, London
Source: Knight Frank/LonRes
-10%
-5%
0%
5%
10%
15%
20%
£750k-£1m £2m-£5m £5m-£10m £10m+£1m-£2m
-1 .1 % - 4.9 %0.5 % 1.1 % -1. 2 % 1.1 %
-2 .5 %
9 M A R Y L E B O N E3 - M O N T H C H A N G E
S A L E S R E N T S
-2 .4 %- 5. 2 %
1 A L D G AT E3 - M O N T H C H A N G E
S A L E S R E N T S
1 6 B A R N E S3 - M O N T H C H A N G E
S A L E S
7 K I N G ' S C R O S S3 - M O N T H C H A N G E
S A L E S R E N T S
2 3 H A M P S T E A D3 - M O N T H C H A N G E
S A L E S R E N T S
13 SOUTH KENSINGTON3 - M O N T H C H A N G E
S A L E S R E N T S
6 K E N S I N G T O N3 - M O N T H C H A N G E
S A L E S R E N T S
2 B E L G R AV I A3 - M O N T H C H A N G E
S A L E S R E N T S
1 7 B AT T E R S E A3 - M O N T H C H A N G E
S A L E S R E N T S
8 K N I G H T S B R I D G E3 - M O N T H C H A N G E
S A L E S R E N T S
2 4 Q U E E N S PA R K3 - M O N T H C H A N G E
S A L E S R E N T S
2 1 D U L W I C H3 - M O N T H C H A N G E
S A L E S
1 4 S T J O H N ' S W O O D3 - M O N T H C H A N G E
S A L E S R E N T S
3 C H E L S E A3 - M O N T H C H A N G E
S A L E S R E N T S
1 8 B E L S I Z E PA R K3 - M O N T H C H A N G E
S A L E S R E N T S
2 5 R I C H M O N D3 - M O N T H C H A N G E
S A L E S R E N T S
2 2 F U L H A M3 - M O N T H C H A N G E
S A L E S R E N T S
1 5 T O W E R B R I D G E3 - M O N T H C H A N G E
S A L E S R E N T S
4 B AY S W AT E R3 - M O N T H C H A N G E
S A L E S R E N T S
1 9 C A N A R Y W H A R F3 - M O N T H C H A N G E
S A L E S R E N T S
10 MAYFAIR3 - M O N T H C H A N G E
S A L E S R E N T S
2 6 W A N D S W O R T H3 - M O N T H C H A N G E
S A L E S
2 8 W I M B L E D O N3 - M O N T H C H A N G E
S A L E S R E N T S
5 I S L I N G T O N3 - M O N T H C H A N G E
S A L E S R E N T S
2 0 C H I S W I C K3 - M O N T H C H A N G E
S A L E S
1 1 N O T T I N G H I L L3 - M O N T H C H A N G E
S A L E S R E N T S
2 7 W A P P I N G3 - M O N T H C H A N G E
S A L E S R E N T S
P R I M E C E N T R A L L O N D O N S A L E S R E N TS 3 - M O N T H C H A N G E
3 - M O N T H C H A N G ES A L E S R E N TS
0.1 %
0.5 %
- 3.9 %
P R I M E O U T E R L O N D O N
1 2 R I V E R S I D E3 - M O N T H C H A N G E
S A L E S R E N T S
P R I M E L O N D O N P R I C E A N D R E N T A L G R O W T H , D E C E M B E R 2 0 2 0
23
24
518
714
1
19
21
26
28
16
20
22
6
114
9
28
3
13
17
25
12
271510
1. 2 % -7.9 %
- 0. 2 % -8.3 %
-1.1 % -1.1 %
0. 2 % -2 .6 %
0.0 %
0.0 % -1.0 %
0.0 % - 0.1 %
0.3 %
- 0. 2 % - 6.6 %
- 0. 7 % - 5. 7 %
0.0 % -1.6 %
- 0.3 % - 4. 7 %
0.0 % - 4.5 %
0.0 % -7.1 %0. 7 % - 0. 7 %
0.0 % -1.0 %0.0 % - 5.5 % 3.6 % -1.4 % -1. 2 % - 5.6 % 2 .9 % 0.6 %
0.0 % 1. 7 % - 0.3 %-1. 7 % - 4.6 %
- 3.3 %
P R I M E LO N D O N L E T T I N G S M A R K E T I N S I G H T Tenants are taking advantage of the downwards pressure on rents and the market remains active
The latest lockdown may further
delay the recovery in rental values,
after a year where supply outstripped
demand against the backdrop of the
pandemic.
Higher levels of supply and
weaker demand continued to exert
downwards pressure on rental values
across prime London markets in the
final months of 2020.
Average rents finished 2020 down
11.9% in prime central London and
9.8% in prime outer London.
Supply has been pushed higher by
a glut of short-term rental properties
coming onto the long-let market
due to the pandemic. Demand from
international students and corporate
tenants has also been weaker due to
Covid-19 and associated international
travel restrictions.
The impact of this supply/demand
imbalance had started to weaken over
the summer but tougher lockdown
measures, including a second national
lockdown in November, pushed rental
values down for a second time in 2020
(see fig. 3) before the latest national
lockdown.
What is also apparent is that
central London has been more
impacted than outer areas including
south-west London, where a stronger
sales market means fewer rental
properties have come onto the
market. For example, the decline
was 3.2% in Wimbledon and 4.2% in
Hampstead during 2020.
Despite the declines, the number
of tenancies started remains well
above the five-year average (see fig
4). Many tenants are moving due to a
need for more space or to be closer to
work, while also taking advantage of
lower rents.
In Canary Wharf prospective
tenants are looking to be able to walk
to work, highlighting an interesting
consequence of the pandemic in the
capital. In Q4 2020, viewing numbers
in Canary Wharf increased by 124%
compared to the same period in 2019.
This compared to a London-wide
average rise of 53%.
As the Covid-19 vaccine roll-out
programme gathers pace, travel
restrictions are relaxed, and London
returns to something closer to
normality, the supply and demand
gap should begin to close this year,
which could see the current trend
reverse.
4 Tenancies rise as rents fallWeekly % change in tenancies started vs five-year average.
Source: Knight Frank Research
-20%
0%
20%
40%
60%
80%
100%
120%
Sep-20 Oct-20 Nov-20 Dec-20
11.9% Annual rental value fall in PCL during
2020
9.8% Annual rental value decline in POL
during 2020
124% Increase in viewings by prospective
tenants in Canary Wharf during Q4
2020.
“What is also apparent is that central London has
been more impacted than outer areas including
south-west London, where a stronger sales market means fewer rental properties have
come onto the market.”
TOM BILL
HEAD OF UK RESIDENTIAL RESEARCH
3 Rental values dipped in prime London after the summern POL n PCL
Source: Knight Frank Research
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20
2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 C U M A L I T I V E2 0 2 1 - 2 0 2 5
P C L 3 % 6 % 5 % 4 % 5 % 2 5 %
P O L 4 % 4 % 4 % 4 % 5 % 2 3 %
P R I M E R E G I O N A L 4 % 5 % 3 % 3 % 4 % 2 0 %
U K 0 % 3 % 4 % 4 % 5 % 1 7 %
G R E AT E R LO N D O N 1 % 2 % 3 % 3 % 4 % 1 4 %
Please get in touch with usIf you are looking to buy, sell or would just like some property advice,
we would love to hear from you.
James Clarke
Head of London Sales
+44 20 3826 0625
Gary Hall
Head of Lettings
+44 20 7480 4474
Tom Bill
Head of UK Residential
Research
+44 20 7861 1492
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. Important Notice: © Knight Frank LLP 2021 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
Knight Frank Research Reports are available atknightfrank.com/research
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We expect UK prices to be flat over the
course of this year (the previous figure
was +1%) and have also removed a
percentage point from our forecasts
for prime central and prime outer
London.
While the short-term economic
outlook has deteriorated, the end
of the furlough scheme will not
necessarily have a materially negative
impact on house prices by itself.
Although the end of the stamp
duty holiday will curb demand, the
Covid-19 vaccine rollout means any
cliff-edge will feel less precipitous by
the start of April.
In Greater London, we expect
prices to be broadly flat this year, with
a forecast of 1% growth reflecting the
greater resilience of the economy
in the capital as support measures
are unwound. Beyond this year, we
expect the UK to outperform due to
affordability constraints in London
as demand is pushed further into the
regions.
A period of price inflation is overdue
in the capital, despite the introduction
of a 2% stamp duty surcharge in April.
Between 2021 and 2025 we forecast
that prices in PCL will outperform the
market, with a cumulative increase
over the period of 25%. The cumulative
price increase in POL from 2021 to 2025
is expected to be 23%, meaning prime
London markets will outpace the UK,
Greater London and prime regional
markets during this time.
Chris Druce
Senior Research Analyst
+44 20 7861 5102
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