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Homebuyers from Home and Abroad Return to the London Market
2022-04-12

  Two years ago, when the Covid-19 pandemic quickly swept the world, many residents could not wait to flee the city. From New York and Paris, across the UK, people living in densely populated urban areas are suddenly forced to work from home, moving to suburban or rural areas.

  But recently, real estate agents in London have noticed a shift in the trend.

  Robin Chatwin, head of residential at Savills South West London, said he had recently finalised home purchases for two families who had moved from the capital to the countryside during the pandemic and now decided to return to the city, both of whom happened to choose London South Wandsworth (Wandsworth) as a new residence. What the two families have in common is that the owner is engaged in urban white-collar work related to banking or law, and often needs to return to his post.

  He said: "In the early days of the outbreak, many people had good reasons to move out of London. Now things are starting to return to business as usual. In fact, over the past few months, we have seen a lot of people who had moved out of London returning to the city. City real estate because they now need to be in the office at least four days a week and it becomes impractical to waste too much time commuting.”

  While Chatwin has been busy approaching UK domestic buyers, his colleagues have recently been dealing with international clients. Trapped by months of travel restrictions, foreign buyers are also hoping to return to London sooner rather than later.

  "In addition to international buyers from overseas, demand from expats living in London is also very strong," said Alex Christian, London regional director of Savills Private Office, Savills Private Office.

  According to a report published by property website Rightmove, in March 2022, the average asking price for a home in the UK hit a record high of £354,564 ($463,526). The average asking price for a London home rose 6.3% year-on-year to £664,400.

  After years of subdued prices, the London property market is heating up with renewed interest from domestic and foreign buyers, despite potential headwinds such as rising inflation and higher interest rates.

Strong demand from domestic buyers after offices reopen

  Chatwin said the current heat in the London property market is mainly from office workers returning to the office.

  "After the office reopens, if everyone else is at the company and you're not there, you're going to find a lot of business that's not going well," he said.

  Chatwin said that from Richmond and Barnes, to Wimbledon and Putney, offices in south-west London have consistently reported that they have experienced encounters over the past few months. Many customers who plan to return to the city to live.

  He said: “It’s not in the hundreds or thousands, but there are definitely more and more people thinking that way. The early movers benefit the most from the market. Sell ​​and move out, and the market moves in a favorable direction, then they have the financial strength to come back to London and buy a new home.”

  Chatwin isn't the only real estate insider to see domestic buyers returning to the London market.

  Stuart Bailey, head of sales at Knight Frank London, high-end property sales, said: “We do see that some people who have moved to the country during the pandemic are starting to think about returning to the city to buy a home. After more than two years away from London, they also realize that working from home is not long-term. count."

City dwellings and suburban dwellings are not a choice

  "Escape the city and move to the countryside" does not represent the full real thinking of urban residents in dealing with the pandemic. Bailey said many clients who had moved out of London were now looking to own a London property as a place to settle, not having to choose between city dwellings and suburban dwellings, but wanting a mix of both.

  This means that properties suitable for temporary accommodation in central London will regain favor with buyers, including some apartments that do not come with outdoor space. He pointed out that these types of apartments are also often the target of international buyers, so domestic buyers in the UK are better off getting deals early, before foreign buyers return.

  According to Toby Dixon, director of sales at DS Churchill, a subsidiary of Christie's International Realty, increased interest in rural properties over the past two years has not hindered the central London property market.

  "It's becoming less and less common to completely move out of the city and settle in the countryside, and instead there is a growing demand for weekend properties," he explained.

  For high-end clients in particular, they are less likely to clear London assets for a move to the countryside, and are more likely to sell their London home for a smaller property and buy another in a relatively remote location.

  Chris Richmond, partner at private property investment firm CIT Group, said: "In prime central London areas, especially in the £15m to £20m range, buyers don't have to make an either-or choice. They don't Selling London property in order to move to the country and instead buy multiple homes to better suit their needs.”

  Other Londoners may simply sell their home for a larger inner-city home, or simply move a little further away from the city centre to enjoy more space and green space.

  “Buyers are looking for comfortable homes, family homes and homes with communal gardens,” says Dixon, who recently sold a Notting Hill house for over asking price just two weeks later. No public listing is required.

  In core communities such as Notting Hill, South Kensington and Chelsea, this is not uncommon and has not been interrupted during the pandemic. Chatwin said he saw a lot of families opting to move to south west London in exchange for the comfort of their local mansions.

  For example, he said he had a client who used to live in a basement apartment in the wealthy Pimlico area and planned to move to a more liveable suburb in four or five years, but the sudden outbreak prompted it to Plans are on the agenda.

  This trend continues even after the "darkest hour" of the new crown pandemic has passed.

  Chatwin said: "A lot of people would now rather move to a bigger city home than move out of London entirely because they realise they will need to be in an office at least four or five days a week from now on, rather than what they thought. For a day or two, it’s more convenient to live in the capital.”

  In addition, the return of foreign buyers to the central London market may also prompt domestic owners to sell existing homes and move further to the suburbs.

The return of foreign buyers to the London market is just around the corner

  Louis Harding, head of the London area for real estate agency Strutt & Parker, believes it is only a matter of time before foreign buyers return to the London market in a big way.

  "In the past six months or so, we've seen some properties that are not normally a primary residence suddenly come back in demand, particularly in places like Belgravia and Knightsbridge," he said.

  Harding said some large-scale high-end and ultra-high-end developments that can move in the bag are becoming particularly attractive.

  While interest from foreign buyers is growing, they are not expected to fully return until later this year, likely between May and July. Buyers from the Middle East, South Asia, the US and Europe are expected to return to the market as the UK eases travel restrictions, estate agents predict. But the market is unlikely to see a large number of East Asian buyers anytime soon, as these countries still enforce strict restrictions on incoming travelers.

  Christian said: "In the two months from mid-to-late September to mid-November last year, we had a long-lost feeling that the London market seemed to be back on track. However, in mid-November, the Omicron The mutant cases caused the situation to take a turn for the worse, with buyers who lived abroad leaving in just a few days.”

  He pointed out that this period is usually not the peak sales season for the London market, because people are mostly vacationing in tropical areas such as the Bahamas or ski resorts, but he has high hopes for the market performance this spring.

  Christian said that although we had agreed that the pandemic would cause the apartment market to be devastated and silent, this is not the case, and perhaps this is the charm of the London market.

  “If you were to ask which area of ​​the market really bounced back last year? I would think it was the new condo market,” he said, citing luxury developments such as Chelsea Barracks in Belgravia and 1 Grosvenor Square in Mayfair. Take the project, for example, which has sold 50 per cent of all 44 apartments since last October.

  Richmond said CIT was selling two new high-end developments - Regents Crescent and Lancer Square.

  "Lancer Square has a few large-sized units planned, and these units usually don't sell until the project goes into liquidation," he said. "But we've found that prospective buyers are more interested in larger-sized units."

Supply-demand imbalance continues to drive house prices up

  Despite rising buyer demand, inventory levels have fallen significantly this year, which is expected to have an impact on prices.

  "I think house prices will continue the trend of modest gains over the past year," Dixon said. "The shortage of supply and strong demand will be difficult to reverse in the short term."

  Bailey stressed that London house prices were already low before the pandemic.

  He added, “We’ve come out of a trough, out of a five-year slump in prices. Now, house prices are starting to stabilize, but the market is still in a moderate growth phase. For example, if you sell an impeccable perfect score The buyer will undoubtedly give you a fair and reasonable offer, but the current market heat is not enough for a 7-point listing to get an exorbitant premium beyond its own value.”

  Prices in prime central London areas will rise by 10% in 2022, driven by strong demand and continued supply constraints, according to Strutt & Parker. House prices in the UK are expected to rise by 20% to 30% over the next five years, while house prices in prime central London areas will rise by a cumulative 20% to 35%, the company said.

  Demand levels have essentially doubled from a year earlier, but housing stock is down about 25 to 30 per cent year-on-year, Harding said.

  Supply for large developments will be particularly tight over the next 12 to 36 months, Richmond said. Building permits are currently difficult to obtain for developments with dwellings over 200 square meters or 2,150 square feet.

  Another reason inventories will remain low, Bailey said, is that domestic buyers, who have dominated the London market for the past two years, are more inclined to sell their existing homes and buy new ones, while international buyers typically do not. Do.

  He explained, “Foreign buyers are simply buying homes and are not contributing anything to housing supply. This means that inventory will continue to be depleted and not replenished effectively, which will undoubtedly put upward pressure on house prices.”