What is the forecast for the London property market in 2022?

Much of the London property market has lagged the rest of the UK in recent months, but it still remains a popular property investment option for many.

After many years of soaring property prices, the capital has seen a major downturn lately. While real estate values ​​remain among the highest in the country, the pace of growth has slowed — and even fallen in some parts of the city — and transaction levels have slowed compared to other places.

Over the coming year, most experts predict that the London property market will continue in the same vein, with slower growth rates than elsewhere. However, the nationwide housing market is expected to slow after the frenzy of the past year, as the effects of the stamp duty holiday and pent-up demand due to Covid begin to fade.

Rising house prices will vary across capitals

A housing forecast of Savills divides the city’s real estate market activity into different sections. In central London, where high-end properties fetch the highest prices, the company expects 2022 to see a steep rise in property prices of 8% over the coming year.

The first outer London district, however, will see a much more modest increase of 4% over the next 12 months. Yet with values ​​already in the multi-million pound region for many of these homes, this increase represents a significant sum of money.

In the traditional London property market, Savills expects house prices to rise by just 2% over the coming year. This is below the UK average of 3.5%, and significantly below the main North West, which could see average values ​​rise by 4.5%.

Zoopla’s latest forecast reflects the same prediction of a 2% rise in London over the coming year.

Is the London property market growing?

Despite the capital’s drawbacks for property investors – including high property prices and falling rental yields – it remains a hugely popular investment location. As a major international city, it is at the center of constant regeneration and investment projects that ensure its continued economic importance.

On top of that, its superior transport system is also being expanded, with Crossrail expanding the areas that property investors can target. Rent in London is also very high, so some investors will find it exceeds the costs initially. The average rent in London in October 2021, according to Zoopla, was around £3,431 per month.

Craig Tonkin, Head of Sales at Bective Agents, said: “While we are now starting to see signs of a market cooling in parts of the UK, London continues to gain momentum.

“This has been driven by an influx of foreign interests at the upper end of the market and we are seeing larger family homes, in particular, come up for supply at a pace due to a severe shortage of ‘offer.

“With growing demand for accommodation in London, the capital is expected to benefit from a sustained level of house price growth throughout the year and into 2022.”

Five-year forecast shows regions leading

From a property investment perspective, regions of the UK – particularly the North West, Yorkshire and the Humber and the Midlands, according to most data – tend to offer the best yield options. House prices are lower, leaving more room for higher returns. These are also the areas that are expected to experience the strongest growth in property prices in the coming years, which means strong prospects for capital gains.

Rental demand is also high and growing in many major UK cities. Manchester, Birmingham, Liverpool and Leeds are all areas often targeted by outgoing Londoners. They are also very popular with students, graduates and young professionals, with a lower cost of living combined with the attraction of the growing number of companies setting up shop there.

Many property investors who have had success in the London property market in the past may be tempted to continue investing there. While there are certainly plenty of up-and-coming locations that offer good buy-to-let opportunities in the capital, it looks like an increasing number of investors and homeowners will consider looking to more remote areas to make the most of their investments.

BuyAssociation has a range of property investment opportunities available across the UK, from London and surrounding areas to the booming North of England. Browse a selection of our opportunities here or contact us for more information.

Penny D. Jackson