Heading into the new year the London property market is experiencing its busiest first quarter in a decade. For those who have already purchased, the sense of urgency is being driven by the looming end of the government's stamp duty holiday on 31 March.
The market surged in the second half of 2020 with the average price of a London home in November climbing 9.7% year-on-year to £514,000 according to the Office for National Statistics (ONS) data. This was the first time that the average price had broken through the £500,000 barrier. It fell back to £496,000 in December.
The movement in London prices was the highest across the UK. This may be linked in part to the stamp duty relief which favors higher value properties, with a £15,000 saving being achieved on a property purchase of £500,000.
The picture in London could also be distorted by the fact that more expensive houses have been selling in the nation's capital rather than flats. In fact, Zoopla's house price index for November suggests that the price in London grew by just 3% in the previous 12 months. As always, it is important to remember that the London market is not homogeneous but varies considerably by district and housing type.
Early indications are that prices could be softening further in 2021. The mortgage lender, Halifax, reported that UK house prices fell by 0.3% in January, the biggest decline since a 0.6% contraction in April 2020. In London, Zoopla reported that 12% fewer homes were listed in January 2021 compared to 12 months earlier.
There are several possible reasons for this decline in listings. Would-be sellers could be worried about entering a falling market or they may be holding off in anticipation of a buoyant Spring market.
Rolling into February, prices in some Outer London boroughs appeared to be on the rise whilst at the other end of the spectrum it was reported that Westminster was down nearly 10% year-on-year due to the absence of offshore buyers.
As noted in our annual review, the London market is facing macroeconomic headwinds that have the potential to seriously blow it off-course. Whilst most market experts forecast a price contraction of approximately 2% in the London market in 2021 the ONS was much more pessimistic at 8%. The steady rollout of the vaccine is building a sense of optimism about a return to normality yet the reality is that the UK economy has experienced its greatest contraction in 300 years.
One thing is certain. For the astute buyer, 2021 will provide a great opportunity to buy quality London property assets at an attractive price.