Prime central London looked poised for recovery at the start of 2020 before Covid-19 forced the UK into lockdown and grounded flights.
The slower rebound of the prime central London property market has been in no small part due to the constraints of international travel. Data from Heathrow airport, one of the busiest in Europe, shows a dramatic decline in passenger numbers since the start of the pandemic.
Between January 2019 and February 2020, an average of 6.6 million passengers landed in Heathrow each month. As Covid-19 spread across Europe in March, this number halved to 3.1 million. Following Boris Johnson’s announcement of a national lockdown on 23 March, the vast majority of flights into the UK were grounded and Heathrow passenger numbers dropped to just 200,000 in April.
A fraction of the international arrivals has meant less competition for prime central London properties and more opportunity for those on the ground. For properties worth over £5 million, 57 per cent of buyers have been from the UK, 44 per cent higher than last year.
Despite the travel restrictions, sales of homes worth £5 million+ recovered well into the third quarter, taking sales for the first nine months of the year ahead of the same period in 2019 both in volume and value terms. This activity suggests confidence in the London market remains strong and will be bolstered by overseas buyers when international travel resumes.
For the lettings market, international travel restrictions have also hampered growth in rental values. There has been less demand from international students and corporate tenants; meanwhile, there has been an influx of supply from the short-term lettings market. Over the next two years, rental values are likely to grow, depending on how quickly international travel is permitted and overseas tenants can return to the bright lights of central London.
The successful development and distribution of a Covid-19 vaccine will play an essential part in lifting international travel restrictions and supporting prime central London’s recovery. So, recent news that two vaccine candidates appear to be highly effective is hugely encouraging.
As such, we remain confident in our residential market forecasts for prime central London. We expect five-year growth of 17.5 per cent for capital values and 7.6 per cent for rental values between 2020 and 2024. London’s recovery is only a matter of time.
To find out more the prime central London market view our latest research report
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