Residential London review Q1 2020

As COVID-19 stalls sustained price growth in Greater London, we review recent data indicating already decelerating growth in high-value locations.

Values for London as a whole saw a year-on-year increase in Q1 2020 for the first time in several quarters, according to the latest Nationwide and ONS house price indices. These are shown in Figure 1 below. The Coronavirus pandemic appears to have stalled any chance of sustained price growth this year.

Figure 1

While the London average is useful, it hides a lot of variation across the boroughs. The charts below illustrate the wide range of performance across the capital’s different local markets, starting with annual change in house prices in Figure 2 below. Over the past year, the lower value boroughs have generally seen the most growth, with Hackney (average value ~£575k) top at 4.9%. The highest value borough, Kensington and Chelsea, saw the largest price falls, at -7.9%.

Figure 2

Over the medium term, the trend is even stronger, as shown in Figure 3 below. The borough with lowest average values, Barking and Dagenham, has seen the most growth over this period at 40%, with Kensington and Chelsea again lowest at -8%, plus a clear gradient between the two. The highest value markets have been hit by changes to SDLT and other taxes over this period, explaining some of the difference in performance.

Figure 3

Longer term – over 10 years – there has been no clear pattern, with relatively strong growth in all boroughs, as shown in Figure 4 below. Hammersmith and Fulham has seen the lowest growth over this period at 55%, with Waltham Forest highest at 105%.

Figure 4

Rents in London as a whole have been growing more slowly than across the rest of England, according to the ONS Index of Private Housing Rental Prices. Annual rental growth in the capital was 1.2% in March, compared to 1.6% in the rest of the country. Figure 5 below shows the two data series, with London seeing lower annual growth in every month since October 2016.

Figure 5

Rightmove and Zoopla reported similar trends in their Q1 2020 results, with the rest of the country seeing more growth than London, as shown in Table 2 below. On all measures, rental growth is running slightly below national wage growth, which was around 3% annual (before any impact on employment or earnings from the COVID-19 outbreak).

Table 2 Portal Rental Data, Q1 2020

Source: Zoopla Rental Market Report, Rightmove Rental Trends Tracker*Note: Zoopla adjusts asking rent data to estimate achieved rents, Rightmove reports actual asking rents.