BEST INVESTMENTS UK – PART 5
UK Property News
Frank Schwartz – HULT Private Capital
Pre and Post COVID London Market
After over five years of nearly uninterrupted quarter-to-quarter price falls, which where the result of prolonged fiscal interference and Brexit related political uncertainty, the London market was unquestionably overdue for a recovery. Pre Covid-19, residential values for the PCL market were down 20 per cent below their 2014 peaks. Currency fluctuations made home prices from Kensington to Knightsbridge and Chelsea to Mayfair look cheap for overseas buyers, especially when combined with a currency play. These factors lead to a brief early 2020 pickup for high-value homes. This bounce was short-lived, COVID hit, and until the summer, the world and notably the London property market stood still for two months.
Image 3 Data Courtesy of PropertyVision.com
Prime Central London was still eager to change when the social distancing and sheltering restrictions finally were eased. The PCL market is a leading indicator for the rest of the London market, which usually follows about two years behind what PCL does.
So why are good things expected to continue, especially for the next four months? Fortunately, the fundamentals behind the 2020 January bounce remain. And the results are already being seen in the high-end category in which are properties that HULT PCL invests. Data from LonRes, a London property data provider, shows that the £1million+ transaction levels for central London in the first quarter were up over the previous year same timeframe, by 18%, and in the middle of the COVID crisis from April to May fell by 64% year on year (as would be expected by the two-month market closure). LonRes found that from June, much of the U.K.’s prime housing market, specifically, the top 5% to 10%, has seen a burst of transactional activity. First, in part due to pent-up demand; a behavioural response to lockdown. This is proven out seeing that the majority of purchases are due to wealthy domestic buyers. They reevaluated their needs during COVID and began searching for indoor-outdoor living spaces in London’s commuter belt, and specifically its wealth corridors. Some were in search of a renewed country living.
There is no mistaking that central London activity has picked up. Looking at the £1m plus category, the June transaction levels increased by 67%. However, there are other areas of the market that have not advanced quite as quickly. If we look specifically at the discretionary income buyers, we don’t see quite the pickup. This particular group is often inclusive of the foreign purchasers, and because of travel restrictions that have been and remain in place, a similar constraint on international demand has been seen. This is expected to be only temporary as more restrictions get lifted assuming the COVID crisis has, in general, run its course.
Looking at the above £5m category, which is often the haven of international buyers, £1.1billion was spent in the first quarter this was 25% above the previous five year’s average for the same period. The second quarter fell to only £500m with £234m of that in June.
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