Greater London Sales & Rental Review Q1 2021

Annual house price growth is positive in Greater London, at above 4%. But transaction levels are below their long-run average and rental growth is negative. Leading indicators show the capital underperforming the rest of England on all three metrics.

Although the rest of England’s price growth outperformed London’s by the largest margin in three years in Q1, values in the capital increased on an annual basis by 4.6% in February according to the Land Registry (and 4.8% in Q1 according to Nationwide). This gap is therefore more about the strength of the regional markets than any obvious weakness in London’s.

The data for London is compared to the rest of England in Figure 1, and it shows that, like value growth, rental growth and transaction levels in the capital are also underperforming those outside. Transactions in London started 2020 around 18% lower than their long-run average, finishing the year at -13% (unchanged from September).

Figure 1: London vs. rest of England: values and transactions

Greater London Q1 2021 Figure 1 London vs. rest of England values and transactions

Source: ONS, Land Registry. *Positive = London performing better than rest of England

The official ONS index above continues to show London’s rental growth only slightly trailing the rest of the country (+0.5% vs +1.7% annual growth in March), but it is based on rents paid for existing tenancies so does not respond to changes in the market very quickly.

Alternative indicators suggest that the difference in performance could be much larger. Rightmove’s Q1 index, based on asking rents, reported a quarterly fall of 0.7% for Greater London, taking the annual change to -7.8% against +4.2% outside the capital. 

Homelet’s March index showed a similar trend, with rents down 5.2% annually in Greater London, compared to growth of 6.8%% in the rest of UK. A summary of the latest data is shown in the table below.

Table 1: Greater London Rental Data

Greater London Q1 2021 Table 1 Greater London Rental Data

Source: Homelet Index (actual achieved rents), Rightmove Rental Trends Tracker (asking rents)

Rightmove’s report breaks down inner and outer London, with the divide noted last quarter growing even further as the start of 2021. Rental values in inner London fell 14.0% compared to a year ago, whereas outer London only saw small falls of 1.1%.

They also looked back over the last five years, highlighting London as the only UK region where rental values had fallen over that period (-2.3%). Again there is an inner/outer London divide on this metric, with inner London rents falling 6.5% since 2016 Q1 vs. a 2.0% rise in outer London. More locally, 65% of neighbourhoods have seen rental falls over five years, with the best and worst performers shown in the tables below.

Table 2: Top 5 London Neighbourhoods, Rental Growth over Five Years

 Greater London Q1 2021 Table 2 Top 5 London Neighbourhoods Rental Growth over Five Years V2

Table 3: Bottom 5 London Neighbourhoods, Rental Growth over Five Years

Greater London Q1 2021 Table 3 Bottom 5 London Neighbourhoods Rental Growth over Five Years

Source: Rightmove Rental Trends Tracker (asking rents, pcm)