Foreign buyer return could boost London house prices by GBP134k
A return of foreign buyer demand could boost property values by GBP134,000 in some pockets of the London property market according to the latest property market analysis by lettings and estate agent, Benham and Reeves.
Based on Land Registry data, Benham and Reeves analysed house price trends in the capital in the six months since travel restrictions dampened foreign buyer activity and how this rate of growth differed from the six months prior. Benham and Reeves then looked at what a return to form may look like once travel restrictions have been lifted.
Since the UK decided to close all travel corridors from the 15th January, house prices have climbed by 2.1 per cent across the London market. This is a 0.5 per cent reduction in the rate of growth seen in the six months prior when prices climbed by 2.6 per cent.
Should travel restrictions remain in place and a similar level of growth remain over the next six months, the average London house price would climb by a further GBP10,701. However, should restrictions lift and foreign buyers be able to return at mass, this additional 0.5 per cent boost would see prices climb to GBP13,496 - a GBP2,795 increase in market values.
The prime central pocket of Kensington and Chelsea is due to see the biggest benefit from a return of foreign interest. In the six months prior to the travel ban, the average house price in the borough increased by 2.6 per cent.
However, since then it has fallen by -8.2 per cent to GBP1,239,831 and a similar reduction over the next six months would see a further GBP101,267 lost in value. In contrast, a foreign buyer revival of 2.6 per cent in values would add GBP32,365 to the average house price in the borough, a total turnaround of GBP133,631.
Other boroughs that could benefit most from a return to pre-travel ban form include Haringey (+76,582), Southwark (+GBP68,705), Merton (+GBP41,434) and Lewisham (+GBP24,207).
Director of Benham and Reeves, Marc von Grundherr, says: “The London market performs very independently to the rest of the UK and so while house prices have increased since the introduction of the stamp duty holiday, we’ve simply not seen the same house price boom like the rest of the UK.
Restrictions around travel and the resulting reduction in foreign buyer demand have also had a far greater impact on London compared to anywhere else across the nation and in some boroughs this has had quite a substantial impact on house prices.
There are still foreign buyers transacting and we’re seeing them utilise both our foreign offices in the likes of Singapore, Hong Kong and India, as well as virtual viewings in order to traverse the obstacles posed by current travel restrictions.
Of course, this level of market activity has obviously been more muted but we expect a strong return to normality once restrictions are eased further. Once the foreign buyer floodgates are fully open, we expect London property values to accelerate, bolstered by domestic demand as many return to the workplace, with the capital regaining the mantle where regional rates of house price growth are concerned.”