The rise in London property prices has accelerated, driven by a shortage of supply and increased demand as people flocked back to offices and the social attractions of the capital.
The Covid pandemic has led to a housing boom across the country, but in London demand has been relatively muted due to reduced migration as home buyers looked for more space outside the city.
However, in the first quarter of this year, London house prices grew at an annual rate of 7.4 per cent, up from 4.8 per cent in the same period last year and the fastest rate since 2016, according to the mortgage provider Nationwide.
While the rate was still below the national average of 12.6 per cent, similar upward trends were reported in house prices compiled by Academetrics, Knight Frank and Halifax.
“The past two years have resulted in a loss of love for city centres such as London,” said Emma Cox, managing director of real estate at Shawbrook Bank.
“But as we see the city centre open their doors to businesses and hospitality . . . [these] hotspots once again are fast becoming an attractive place to be,” she added.
“Over the last few months, London has come back on the radar of buyers as the economy reopened,” said Tom Bill, head of UK residential research at Knight Frank.
The trend is echoed by other economic indicators. The average asking price of a London property up by an annual rate of more than 6 per cent, a reversal of the contraction that began in early 2021, according to the property website Rightmove.
The proportion of surveyors who expect house prices to rise in the capital was its highest since 2014, and greater than the national average for the first time since the crisis began, according to the Royal Institution of Chartered Surveyors, a professional body.
Rising demand has bumped against a shortage of London properties for sale. “The acute supply and demand imbalance across London has driven pricing and competitive bidding on properties,” said Angus Dixon, director of private clients at the property consultants INHOUS.
Activity is strongest among the most expensive properties where “buyers are less exposed to increased costs of living and costs of debt”, said Alec Harragin, a director at the London surveyor company Savills.
While John King, surveyor at Andrew Scott Robertson, confirmed that demand for houses in the £1mn-£2mn range “was the most active sector”.
Despite the pick-up, the London property market has been underperforming the national average since 2016 and still lags behind other regions in the UK.
A lack of foreign buyers still weighs on the capital’s housing market, according to Bill from Knight Frank, despite some improvements, adding that he expected it to underperform the national average in the months ahead.
Many experts warned that affordability was a longer lasting problem in the capital. Like the rest of the country, “concerns about interest rates, the economy and the war in Ukraine will be factors that could well dampen the market”, said Allan Fuller, of Allan Fuller Estate Agents in London.
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