The top of the central London property market hit by the absence of an overseas buyer

The central London property market has yet to see a solid return from investors (Joas Souza)

Wealthy foreign buyers still haven’t returned central london property market in figures seen before the pandemic despite the lifting of all restrictions in the UK, a report warns today.

The shortfall means the rebound in the main central market is much slower than expected with prices still well below their 2014 peak, according to research from leading London estate agents Savills.

Average prices rose only 0.7% in the second quarter and 3.3% year-on-year.

Although this is the fastest rate since September 2014, it is still well below growth in London and the UK as a whole.

Many Asian shoppers, especially those from China and Hong Kong, have been hesitant to travel to London due to the still onerous Covid restrictions when returning home. Returning passengers must quarantine for at least 14 days.

Russian buyers have also completely dried up since the start of the war in Ukraine, although they have become scarce since relations with the West collapsed during the 2014 invasion of Crimea.

It was also the year stamp duty reforms introduced by former Chancellor George Osborne dramatically increased rates on purchases over £1million, including a new maximum rate of 15% on homes worth over £2million bought through a company – a route used by many overseas. investors.

Since then, a wave of setbacks have hit the main central market, including Brexit, further tax changes and, most recently, the pandemic.

Frances McDonald, research analyst at Savills, said: “As London continues to return to normal, central London values ​​have continued to recover over the past three months, after being in the doldrums for much of the pandemic.

“However, prices in central London are still down 17.6% from their 2014 peak, meaning there are still plenty of opportunities for buyers – especially those buying in foreign currencies, given the recent improvement in the monetary advantage.

“But unless wealthy overseas investors return to their pre-pandemic numbers, we can expect the market to continue to recover at a slow and steady pace, rather than with a sharp upside.”

She added: “Sales at the high end of the market have been driven by domestic buyers since the start of the pandemic and remain the market driver. International arrivals to the UK are still 18% lower than the same period in 2019, so growth is being held back by a slower-than-expected return to normal travel.

“The high end of the market is less dependent on borrowing, reducing its exposure to further rate hikes. However, it is not completely immune. The low cost of borrowing in recent years has allowed major buyers to take out larger mortgages, particularly in the South West and West London family home markets.

“However, with rates still at historic lows, we do not expect any near-term impact, particularly given the high levels of equity in most prime locations and the propensity of buyers to enter into fixed-term contracts. “

Houses continue to outperform apartments, but the gap between the two is narrowing.

McDonald added: “The return of workers to the capital has been a driver of the rebalancing between houses and apartments. Even with hybrid working becoming more conventional, workers still want to be close to the office, and the number of subway users commuting to the city hit a new post-pandemic high in June at 60% of the pre- pandemic.”

Due to shifting demand, the growth mix has shifted from locations that have performed best during the pandemic to areas of London that combine strong markets for first-time buyers, family and investors – as well as outdoor space.

The figures are: Notting Hill (+2.2%), Clapham (+2.1%), St Johns Wood (+2.1%) and Pimlico (+2.0%) which overtook Wimbledon (1.4 %), Chiswick (+1.0%). ) and Wandsworth (+1.0%).

Penny D. Jackson