As a result of the unique impact the extended stamp duty holiday and repeated lockdowns have had on what affluent buyers are looking for, we have upgraded our forecasts for the UK’s prime housing market. Here is a summary of what we can now expect: 
 

Momentum continues to build across prime regional markets

We know that the various Covid-19 lockdowns saw affluent buyers reconsider what they wanted from their home, with many searching for more space and considering lifestyle and relocation moves. This flurry of activity meant that well-priced properties, particularly in the prime country and coastal markets, were snapped up quickly, with many homes in more sought-after markets attracting competitive bidding.

As a result, the prime regional markets have grown across four consecutive quarters, and we now expect them to achieve 9.0 per cent growth during 2021 on average.

But, as lockdown restrictions have been lifted and the vaccine rollout continues at pace, more stock is likely to come to the market and a readjustment in buyer and seller expectations will be crucial to maintain the current market momentum.

We expect prices to increase by 25.1 per cent (up from +20.5 per cent) over the next five years. Growth is expected to be led by London’s suburbs (+26.0 per cent) and the wider south (+25.7 per cent) which have hugely benefited from buyers relocating from more central locations.

Central London’s recovery delayed

For prime central London, activity has remained robust, but this is yet to translate into any meaningful price growth. Values have increased over the past year for the first time since the stamp duty overhaul in 2014, through only by a marginal 0.5 per cent.

Domestic buyers and London-based internationals have predominately focused their attention on houses with outside space, while the prime central London flats market has lagged.

However, there’s huge pent-up demand from those for whom travel has been restricted over the past year. We expect to see a rebalancing now that office-based workers are returning to their desks and international buyers can visit more easily again.

Buyers will be well aware of the opportunity to be had while prices remain lower. The value on offer is significant in both a historical and global context – with values on average 20.3 per cent below their 2014 peak.

This opportunity won’t be around for long. We expect prices to bounce back next year – with 8.0 per cent growth predicted in 2022.

Outer prime London growth upgraded

We have also upgraded our forecast for outer London to +15.9 per cent (from +14.8 per cent) following a strong start to the year. Much like the regional markets, larger family homes with outside space have been the top performers. However, now that social distancing measures have been relaxed and office workers return, we expect to see more demand for a range of property types.

Our latest buyer and seller survey suggests that there’s still unmet demand from those looking to move within London and those looking for a weekday base, allowing for growth to be sustained.

Further information

Contact Frances Clacy

Contact Savills Residential Research