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The London property market has always been in a league of its own, characterised by high demand and unrivalled property prices compared to the rest of the UK. The average property price in London has grown considerably over the last ten years, with data from Land Registry showing the property value in the city has grown by over 46% – from approximately £355,830 to £517,726.

Following several years of robust price increases, the pandemic and various economic factors have slowed growth in the last few years. But what does the London property price forecast look like for 2024 and beyond?

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London Property Market in 2023

Reduced affordability and demand for property in response to the wider cost-of-living crisis put downward pressure on property prices across the UK; and it was London’s property market that bore much of the brunt. This was due to its comparatively higher average property prices and greater borrowing requirements.

But the London property market is traditionally robust due to the city’s position as an economic, financial, cultural and entertainment hub and the enviable lifestyle it provides. Its popularity is unwavering amongst homebuyers – both domestically and internationally – and this was evident by the second half of 2023 when it became clear that the predicted 10% decline in property values failed to materialise. Instead, London remained relatively resilient, with Zoopla data revealed just a 2% decline in London property values by the end of the year, second only to the East of England (-2.6%) and the wider South East (-2.4%).

By the last quarter of 2023, the downward trajectory of the London property market began to ease as The Bank of England continued to hold interest rates at 5.25% in line with decreasing inflation rates, giving hope that interest rates would begin to fall in the new year.
Data began to look far more promising, leading property experts to revisit their previous predictions as homebuyer demand began to pick up for the London market.

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SUPPLY AND DEMAND

Both demand and supply in the London property market were comparatively low throughout the first half of 2023 as homebuyers exerted more caution in response to several increases in mortgage rates whilst sellers held out for a better climate.

However, by end of the year, homebuyer sentiment began to rebound sharply – and it was London and the South East that reaped the benefits the most. Data from Zoopla’s September House Price Index revealed a 12% upturn in demand for property across all regions of the UK, with London outperforming this with a 16% uptick, bringing buyer demand in line with pre-pandemic levels.

Jeremy Hunt’s spring budget in March signalled further optimism of a healthier property market with the OBR predicting imminent inflation rate cuts and raising hopes that interest rates will follow suit. This, paired with a 4% cut in capital gains tax to encourage sellers has resulted in a better balance of supply and demand – helping to moderate property prices as well as encourage more homebuyers to return to the market.

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DEMAND FOR LONDON APARTMENTS

Demand for apartments for sale in London remained high throughout the year, and this is a trend that has continued well into 2024.

Zoopla’s September House Price Index confirmed that whilst buyers seemed to be holding out for the type of property they wanted, apartments in London experienced a surge in demand, reinforcing the appeal of apartments in the Capital and this resulted in a more moderate decline in property prices than any other type of property. According to semi- and detached properties respectively by December 2023.

Overall, property experts Zoopla revealed that demand for property in London was leading the way in the UK markets recovery in the first few weeks of 2024.

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THE RENTAL MARKET IN LONDON

While property price growth contracted for most of 2023, London’s private rental market continued on an upward trajectory as the chronic mismatch between supply and demand remained.

Finishing the year with 6.9% annual growth in private rental prices in the 12 months to November, London once again outperformed the wider UK’s 6.1% increase during the same timeframe. According to the Office for National Statistics, this was the highest annual percentage change in England and the highest annual increase for the capital since records began in 2006.

Rightmove recorded a 16th consecutive record in newly advertised rental prices, however, Q4 saw slowed growth as more properties became available. Data from The Royal Institution of Chartered Surveyors (RICS) reported in their November 2023 UK Residential Market Survey that demand continued to grow and the disparity between demand and supply – although moderating – remained a key factor in rising rents.

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LONDON PROPERTY MARKET FORECAST 2024

While property price growth contracted for most of 2023, London’s private rental market continued on an upward trajectory as the chronic mismatch between supply and demand remained.

Finishing the year with 6.9% annual growth in private rental prices in the 12 months to November, London once again outperformed the wider UK’s 6.1% increase during the same timeframe. According to the Office for National Statistics, this was the highest annual percentage change in England and the highest annual increase for the capital since records began in 2006.

Rightmove recorded a 16th consecutive record in newly advertised rental prices, however, Q4 saw slowed growth as more properties became available. Data from The Royal Institution of Chartered Surveyors (RICS) reported in their November 2023 UK Residential Market Survey that demand continued to grow and the disparity between demand and supply – although moderating – remained a key factor in rising rents.

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LONDON, Oct 10 (Reuters) - Britain's housing market recovered further last month, according to property surveyors who said house prices, sales and enquiries rose, but pressure in the rental sector intensified as tenant demand continued to outstrip the number of available homes to rent.

The Royal Institution of Chartered Surveyors said on Wednesday that its main house price balance, which measures the difference between surveyors seeing falls and rises in house prices, moved into positive territory for the first time since October 2022.

Its house price balance rose to +11 in September after a revised August reading of zero, well above the +4 forecast by economists in a Reuters poll. A net balance of +54 of surveyors expected house prices to increase in the coming year, the strongest reading since April 2022.

A measure of expected sales for the next 12 months rose to a net balance of +45, compared to +3 a year ago.

Tarrant Parsons, RICS' head of market analytics, said the reduction in borrowing costs in August had helped to recover buyer demand.

"A further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward," Parsons said.

The Bank of England's benchmark Bank Rate now sits at 5% after August's first reduction in borrowing costs in four years. The British central bank kept rates on hold last month. But investors on Wednesday assigned a roughly 83% chance of a quarter-point cut on Nov.7.

Other gauges of Britain's housing market have also pointed to a recovery, helped by expectations of another interest rates cut by the BoE. Figures from mortgage lender Halifax on Monday showed house prices grew in September at the fastest annual pace since late 2022.

RICS said that a potential rise in capital gains tax in the new Labour government's first budget later this month was prompting some homeowners to list their properties but that this was contributing to a lack of supply for renters.

In the lettings market, demand continued to tick up and rents are projected to rise over the coming months.

Finance minister Rachel Reeves has warned some taxes will have to go up in her inaugural Oct. 30 budget.

Reporting by Suban Abdulla, editing by Andy Bruce

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Vicky Shaw 30 September 2024

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September has seen the fastest annual house price growth in around two years, according to an index.

London saw house prices have seen annual growth of two per cent, with an average house price of £524,685. “London remained the best performing southern region,” said Robert Gardner, Nationwide’s chief economist.

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House prices across the UK increased by 0.7 per cent in September alone, Nationwide Building Society said.

This resulted in the annual price growth rate accelerating from 2.4 per cent in August to 3.2 per cent in September, the fastest pace since November 2022 — when there was a 4.4 per cent rise.

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The average UK house price in September is £266,094.

“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarter,” explained Gardner.

“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”

Jeremy Leaf, a north London estate agent said: “The market has changed and demand is improving which has coincided with lower mortgage rates and a more settled picture for inflation and politics.

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“This shift has resulted in more appraisals, listings, offers and firming pricing.”

While the Bank of England is still holding the base rate at five per cent, lenders have been competing to offer interest rates below four per cent. This includes Nationwide’s own offering to first-time buyers that will allow them to borrow up to six times their salary.

“Competition among lenders to offer cheaper mortgage rates is boosting housing market activity and property prices,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

“Many buyers were waiting for rates to come down before taking action and now that the Bank of England has made that all-important first cut, with another expected in November, this will further encourage those who may be wavering.”

Holly Tomlinson, a financial planner at wealth manager Quilter said: “The Bank of England’s recent move to hold the base rate steady, while not transformative to mortgage rates, does continue to provide stability to the market and will continue to help more competitive mortgage deals re-enter the market.

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Lenders are competing to attract custom, and a more stable environment is likely to mean they go further with rate cuts.”

Matt Thompson, head of sales at Chestertons, agreed that interest rates were pivotal to the housing market boost.

“Pent-up demand, lower interest rates and sub-4 per cent mortgage products resulted in more house hunters entering the market in September,” said Thompson.

“In response to the uplift in buyer activity, and with looming changes to Capital Gains Tax in the upcoming Autumn Budget, we have also seen more sellers putting their property up for sale.”

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Concerns that the budget may bring a higher rate of Capital Gains Tax has spooked landlords in the capital, with one in five homes listed in inner London currently being ex-rental properties.

Property industry experts were positive about energy returning to the market, but cautioned that buyers are still sensitive to asking prices.

“The base rate still remains significantly higher than we’ve seen in recent years and whilst buyers are returning with confidence, we’re not quite out of the woods yet with respect to transactional volumes, which still remain someway off the previous pace,” said Verona Frankish, chief executive of Yopa.

Marc von Grundher, director of Benham and Reeves, said: “The property market has continued to prove its resilience, with house prices now increasing at their fastest rate in two years and climbing close to historic record highs.”

Guy Gittins, chief executive of estate agent Foxtons said: “We’re already seeing more inquiries made, more offers submitted and more sales agreed, all of which bodes very well for the remainder of the year and beyond.”

Sarah Coles, head of personal finance, Hargreaves Lansdown said: “These aren’t runaway price rises, but they’re firmly positive, which always helps boost buyer sentiment and keep the wheels rolling on the property bandwagon.”

Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Although we are still at the very start of the journey regarding base rates, we are starting to see lenders introduce improved competitive offerings when it comes to mortgage deals.”

Gardner said Nationwide’s most recent data by property type indicates terraced houses have seen the biggest percentage rise in prices over the past year, with average prices up by 3.5 per cent.

Semi-detached and flats saw increases of 2.8 per cent and 2.7 per cent respectively, whilst detached houses recorded growth of 1.7 per cent.

Gardner added: “If we look over the longer term however, detached homes have continued to have a slight edge over other property types, most likely due to the ‘race for space’ seen during the pandemic.”

Detached properties have increased in price by 26 per cent since the first quarter of 2020, while flats have only risen 15 per cent in price in the same time frame.

Here are average prices in the three months to September and the annual change, according to Nationwide Building Society:

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The quarterly London housing market report summarises key trends and patterns in London’s housing market. The analysis covers topics including house prices, rents, sales and new supply. The report primarily draws on publicly available datasets.

The London housing market report is updated quarterly by analysts at the Greater London Authority. The most recent London housing market report was published in August 2024 and contains data for summer 2024. The next edition will be published in November 2024.

The reports are listed below in date order, with the latest publication at the top:

• 2024, August (PDF ¦ Webpage)
• 2024, May (PDF ¦ Webpage)
• 2024, February (PDF ¦ Webpage)
• 2023, November
• 2023, August
• 2023, May
• 2023, January
• 2022, October
• 2022, July
• 2022, April
• 2021, December
• 2021, September
• 2021, June
• 2021, March
• 2020, December
• 2020, August
• 2020, May
• 2020, February
• 2019, November
• 2019, July

The housing market sits alongside other GLA reports, including the more detailed annual Housing in London report which is available here.

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