According to LonRes’s Market Report 2020, the introduction of new additional restrictions in the capital, people’s homes have become more of a haven than ever. Therefore, buyers and renters continue to prioritise searching for a property that is capable of adapting to their changing needs.
Meaning that despite ongoing economic uncertainty, buyers and prospective vendors are continuing to drive into the market. This has resulted in an increased number of properties going under offer for the third consecutive month in September, and the number of homes coming to market almost doubling on 2019 levels.
For rentals, those markets which appeal to domestic tenants, such as the outer London Boroughs, are more balanced in terms of supply and demand. Yet, we are still witnessing the volume of new instructions outpace new lets agreed, which has impacted achieved rents again during September.
Despite the slight downfall with new instructions between March and May, the first nine months of 2020 saw a 19% increase in the number of new properties coming onto the market compared to the same period in 2019. August and September were both particularly busy for the London with the number of instructions in September this year were almost double compared to September 2019. Demand during September remained strong, with the number of offers being accepted on properties rose by 21% compared to 2019 – but the lengthier periods between offers being accepted and home exchanging contracts during September was 18% lower than last year.
Looking ahead, if current trends continue, we expect more activity in markets which appeal predominantly to domestic buyers. Yet despite a question mark over the ability to travel to and from London, the combination of stamp duty saving, the introduction of additional charges for overseas buyers in April 2021 and a weaker pound could prove tempting for overseas buyers. These factors combined could see many international buyers making savings of up to 40% off the price they would have paid at the peak in 2014.
In Rightmove’s latest House Price Index for October 2020, the average house prices in London has risen by 2.6% compared to last year and currently stands at £634,399. The average time to secure a buyer in London is currently sitting at 48 days – the second lowest after Scotland on 31 days and on par with the West Midlands.
Within the same report, it was highlighted that the current momentum has been caused by the combination of pent-up and new demand has led to new records in several key metrics, and as a result Rightmove forecasts that the annual rate of increase will rise further before the year-end and peak at around 7%. The forecasting rulebook has been rewritten in this extraordinary year, with predictions of a post-lockdown price plunge in quarter three failing to materialise.
London is a truly international city, with the ability to attract new residents from across the globe, but with current restrictions on travel and movement, set by both the UK government and by their home nations it is also more vulnerable to changing levels of demand.
Rightmove is reporting in it’s Q3 2020 Rental Price Tracker that London is only region where rents are falling – down by 6.8% in Inner London, while rents in Outer London are up by 0.8%. Asking rents have been falling since the beginning of lockdown in the capital, and are now an average of £110 per month lower than back at the start of lockdown. Looking at property types in London, asking rents of studio flats are 3.5% lower than this time last year, one-bedroom flats are down by 3%, and two-bedroom flats are down 4%. Two-bedroom houses are faring better, up by 0.7%.
The total rental stock in London in September has increased by 80% compared to 2019 – with the available stock levels for studio apartments doubling as people look for spare rooms to set up space to work from home.
It’s hoped that this momentum continues into October but realistically current stock levels combined with lower levels of demand, particularly in those markets more reliant on overseas tenants will, we expect, put further pressure on rents as we move through autumn and into the winter market.
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