By Alpa Bhakta, CEO, Butterfield Mortgages Limited
It is fair to say that 2021 has been another landmark year for the UK’s real estate industry. Following the volatility of 2020, we have seen a year of welcome prosperity and stability in the sector, with ever-rising house prices and strong levels of transactional activity, despite the challenging economic environment. Indeed, data from Nationwide showed UK annual house price growth rose to 10% in November, with demand remaining strong after the stamp duty holiday ran its course.
London’s prime property market has also held its ground, despite the additional pressures it has contended with, such as the notable absence of overseas buyers for the most part of the year. Nonetheless, unmistakable green shots of recovery have sprung over the last quarter, with leading estate agents projecting optimistic outlooks for the year ahead.
Recent data from Knight Frank highlighted that the lifting of travel restrictions coincided with the highest annual growth in PCL prices since 2015 in the latter part of this year, with the market resuming a recovery that was interrupted by the pandemic.
Forecasts from Savills support the notion that London’s prime residential market is overdue a recovery and predict PCL could experience the strongest house price growth across all UK markets over the next five years, which could reach 24%. This would see prime central London values return to their previous 2014 peak for the first time.
Similarly, Winkworth predict prices across the capital’s most coveted postcodes could rise by 6% or 7%, with traditional areas like Kensington and Chelsea expected to drive forward the wider area’s recovery.
The industry’s positive long-term outlooks are not just a reflection of the country’s ongoing strides towards a greater normality in the near future, despite the underlying risk of new Covid strains materialising, as seen in recent weeks with the spread of the Omicron variant. Confidence in the market is also underpinned by the high levels of pent-up demand which have accumulated throughout the pandemic, from both domestic and international buyers, which coupled with the shortage of available properties, is set to continue to push prices forward. In turn, property continues to be perceived as a safe-haven asset.
Furthermore, London has maintained its attractiveness as a global financial and tech hub and continues to draw in high-net-worth individuals. Indeed, Knight Frank’s City Wealth Index, positioned London at the top of the ranking, along with New York. Knight Frank’s data revealed the capital is home to 6,611 UHNWIs and 874,354 high-net-worth individuals, the most HNWIs of any city globally.
As ever with market predictions, some note of caution is wise. The pandemic has made it clear that we should never look too far in advance, as there are too many live variables to contend with which could affect the market’s dynamics; the recent spike in Omicron cases has been a case in point.
All things considered, the fundamentals of the market look to be in a strong position heading into 2022. While new challenges could arise, PCL has proven itself resilient to upheaval and we remain confident that the market’s recovery will forge ahead at a good pace.
