London Property Market Quarterly Review – March 2021
01 Apr 2021

The robust performance of the UK property market in 2020 prompted Andrew Bailey, Governor of the Bank of England (BoE), to wryly observe that if the only economic statistic available was the one for mortgage approvals you would never know that there had been a pandemic raging in 2020. If there had been any doubts beforehand, 2020 proved once and for all that property is Britain's national obsession.


By November 2020, the average price of London property had reached record highs, breaking through the £500,000 barrier for the first time. The Office for National Statistics (ONS) reported that annual growth for London house prices was 7% in November, slipping back to 3.5% in December as the average price in the nation's capital fell by £5,000.


Heading into 2021, prices across the UK slipped further in January. The Nationwide House Price Index (HPI) contracted by 0.2%, with Halifax also showing a 0.3% price reduction. This was the biggest fall since April 2020 when the property market was in lockdown and the government's stimulus package had yet to kick in. As the market ticked over into February, the Nationwide HPI rebounded to show monthly growth of 0.7%.


Rolling into March, property portal Rightmove's House Price Index showed that the average house price had risen by 0.8% amidst reports of the strongest spring seller's market in the past 10 years with two out of three properties on agents’ books sold subject to contract.


So, what are we to make of this uncertain start to the property market for 2021? Will it recapture the momentum of 2020? Or will sales evaporate as the government stimulus is withdrawn? In the following paragraphs we examine what cues the London market is following and why you should be cautious in basing your property purchase decision on average price indicators.


Lockdown Blues

As the muted Christmas and New Year celebrations receded into the background, the UK once again found itself in a hard lockdown. In the midst of rising infection rates, the dining room table again became a shared workspace for parents and children. Whilst property listings typically fall away in the winter months, this has been exacerbated by the restrictions of lockdown. Whilst the real-estate industry hasn’t closed its doors in the third lockdown, property viewings could only be conducted in a virtual environment.


For those consumers still searching for a new home, the key motivators were likely to be lifestyle related rather than the tax savings on offer through the government's Stamp Duty holiday, due to expire at the end of March. The 2020 themes of buyer demand for more space, both indoors and outdoors, and home buyer mobility was still in vogue as remote working encouraged consumers to look for larger homes in the greener outer suburbs.



Economic Outlook

It is no secret that the UK notched up two ignominious milestones related to the pandemic: one of the highest fatality rates per capita globally and, amongst developed nations, the steepest economic decline. During the first lockdown the UK economy fell off a cliff, output falling by a record 20% in Q2, 2020. The solid 15% rebound in Q3 was snuffed out in Q4 as productive capacity lay idle in the subsequent lockdowns leaving the UK economy 11% smaller by year-end.


By February the economic mood turned decidedly gloomy on the news that UK exports to the European Union (EU) fell by 40.7% (£5.6bn) in January, the biggest monthly decline in British trade for 20 years. These Brexit related concerns were reinforced by the ONS numbers showing that imports from the EU also fell by 28.8%. The only good news out of the 2.9% contraction in January GDP was that it outperformed market analyst forecasts of a 4% drop.


For all that, there is a palpable sense of defiant optimism in the national mood thanks to the success of the vaccine rollout. In May 2020 the UK government fortuitously provided seed funding for the development of several vaccines, including Oxford AstraZeneca. The expectation that the UK is edging closer to fully reopening its economy is cause for both cautious optimism and national pride. With formidable economic challenges ahead, it is vital that the government harnesses this ebullient mood.



Government Stimulus

The match that lit the fuse to the runaway success of the housing market in 2020 was the government stimulus program rolled out when the pandemic first struck. Firstly, through the furlough scheme, the livelihoods of millions of UK workers were protected, preventing a surge in unemployment that would have cratered the consumer economy. Extended several times, the scheme is currently due to expire at the end of September.


Secondly, the Stamp Duty Land Tax (SDLT) holiday provided tax savings of up to £15,000 on the purchase of residential property. For those in cramped accommodation on a diet of endless Zoom calls this provided the necessary encouragement to move from browsing property portals to actually buying the home that would meet their lockdown lifestyle requirements.


In his recent March budget, the Chancellor, Rishi Sunak, extended the SDLT holiday in its current guise until the end of June with a further tapering until the end of September. Essentially, this was done to ensure that the logjam of several hundred thousand sales that had not yet completed could reach fruition. It will also have encouraged a fresh round of property purchases post-budget with the probability of industry demands for a further extension.


The Chancellor also used his Budget speech to announce the launch of a revamped Mortgage Guarantee Scheme (MGS) to both encourage first-home ownership amongst ‘Generation Rent’ and housing ladder mobility. The scheme enables eligible lenders to offer mortgage products up to 95% of loan valuation through accessing government-backed credit facilities. Throughout 2020 home buyers without a 20% deposit were left struggling in the wake of tightened credit markets.



Falling Rental Prices

Gross rental yields in London are in danger of slipping further behind its northern neighbors Manchester, Birmingham and Liverpool. The leading real-estate firm, Knight Frank, reports that in the year to January average rental values in Prime Central London (PCL) fell by 13%. In Prime Outer London the contraction was marginally lower at 10.7%.


The backstory to this narrative is equal parts an increase in supply and a collapse in demand. As the pandemic rapidly spread from Asia into Europe, the Americas and Africa one of the biggest casualties was international travel. Whilst the UK government did not close its borders, London's Heathrow and Gatwick airports came to resemble ghost towns with normally bustling concourses deserted.


London's short-term accommodation market, notably Airbnb, relies upon both international business travelers and tourists. With the collapse in inbound travel, landlords hastily converted their short-term lets into long-term rentals. Unfortunately, this extra supply hit the market at the precise time as demand was imploding. For the first time in 30 years London's population was going into decline.


The government funded Economics Statistics Centre of Excellence (ESCoE) has estimated that since the onset of the pandemic that almost 700,000 foreigners may have left the city. Whilst this is an estimate only, it is echoed by figures from the Oxford Migration Observatory analysis of Labour Force Survey which suggest that 4.3% of London's immigrants may have left.


Whilst some commentators predict that a significant proportion of these foreign workers will return when hospitality, travel and tourism industries rebound, the new Brexit induced points-based immigration system will be a significant barrier to entry. And, of course, tens of thousands of these hospitality jobs have simply disappeared forever. On top of this, the rental market has also been hit by international students and young, domestic renters choosing to return home to ride out the pandemic.


Predictably, the net effect of this excess supply meeting a collapse in demand is that some landlords are having to slash prices to attract tenants. Across central London, reductions of more than 25% have become relatively common. In many cases, tenants are taking advantage of falling rents to relocate to new parts of the capital. Until such time as international travel resumes and there is a return of immigrants, this theme will continue to play out.



Patchy Price Performance

The news that the average price of London property had broken through the £500,000 barrier made for an eye-catching headline. But does it really provide guidance as to what direction the market is taking? Of course, the term ‘London property market’ is itself a misnomer. Across the capital's 32 boroughs there is an array of sub-markets being pulled in different directions.


But let's start our review with a breakdown of pricing on geographic terms. According to Knight Frank, house prices in PCL declined by 4.3% in the year to January. The leading real-estate firm noted that across the same time period price growth in Greater London was an altogether healthier 9.6%. PCL has a high concentration of flats and according to the data company, Twenty Ci, the price of flats in inner London fell by 16.2% in the same time period compared to a more modest fall of 6.7% in outer London. So, what are the factors shaping this experience?


International investors have been active buyers of residential property in PCL over recent years, reflecting the fact that the London property market enjoys a reputation as a safe haven through times of social, political and economic turmoil. In the aftermath of the Brexit vote in 2016, these investors opportunistically snapped up prime residential property at heavily discounted prices, particularly when accounting for the favorable exchange rate resulting from the devaluation of the Pound Sterling. When global travel resumes, there is an expectation that these offshore buyers will return in force.


The market action in outer London boroughs is more driven by domestic buyers. As noted above, the lockdown experience has fundamentally changed the market dynamics. Couples and young families are shunning inner-city life in favor of the enhanced accommodation options to be found in London's outer suburbs or surrounding commuter belt. The net effect of this migration has inflated the price of terraced and semi-detached homes and, correspondingly, put a sizeable dent in the price of flats.



Non-Resident Stamp Duty Surcharge

Effective 1 April, UK non-residents will be hit with a 2% SDLT surcharge on their residential property purchase. The government's rationale in introducing this surcharge is to put a brake on the volume of offshore buyer activity, take the heat out of property affordability and improve access for domestic buyers.


As noted in our recent article on this subject, this rationale looks shaky on several counts. There is a distinct tendency, in London at least, for international investors and domestic buyers to be focused on different market segments rather than competing for the same properties. Offshore buyers are also active in the off-plan purchase of new-build properties, often flipping these properties prior to completion and avoiding SDLT.


Ironically, it was the government's SDLT holiday in 2020 that ignited the market and sent prices escalating. This price inflation was also driven by domestic buyers to a much greater extent than international investors.


With prices in PCL already depressed, it is doubtful that the imposition of this surcharge will provide offshore buyers with any significant leverage to negotiate further price reductions. Due to the pandemic, this price deflation is already baked in.


This surcharge is supplementary to the existing 3% surcharge for second-home buyers. Whilst the BNO visa does not provide exemption from the non-resident surcharge, those visa holders who meet the UK government residency requirements may find that they are able to gain relief from the impost. This should be thoroughly assessed pre-purchase with a UK tax accountant.



Market Direction

As we have indicated, it is a misnomer to talk about the London property market in terms of it being a homogenous market. This is the reason you need to be very clear about the specific dimensions of your property search before you start on your homebuying journey. And do your homework to understand the forces that are shaping the market segment you intend to buy into.


So, let's look at how things are likely to play out. Firstly, the extension of the furlough scheme is a positive development for the housing market. A blowout in the unemployment rate could result in an escalation in mortgage delinquencies leading to foreclosures and prices cratering. But the Chancellor has made clear that not every job can be protected. At the end of 2020 the unemployment rate had risen to 5.1% and major retail brands are fast disappearing from the high street.


It is unlikely that the SDLT holiday extension will have the same effect as it did in 2020, particularly in the luxury segment of the London market which prospered last year. With the average sale taking 18 weeks to reach completion from offer acceptance it is improbable that buyers will beat the 30 June deadline, at which point the scheme tapers off.


The first homebuyer market could prove to be the exception. With the government MGS encouraging ‘Generation Rent’ to gain a foothold on the housing ladder with a minimum 5% deposit, the abolition of stamp duty on purchases up to £250,000 through ‘til the end of September could prove enticing. With the UK poised to break free of all lockdown restrictions in late June, the return of something resembling ‘normal life’ could breathe new life into the languishing market for affordable flats as first homebuyers take advantage of these government initiatives.


In the short term there is no sign of borrowing costs increasing to cast a shadow over the housing market. But with bond markets providing more than a hint that inflation on both sides of the Atlantic may escalate sooner than central banks had planned, astute buyers would do well to look at five-year interest rates.


The narrative concerning homebuyers moving to the outer boroughs in search of larger homes shows no signs of abating. Post-lockdown, many employers intend to move to a hybrid model where employees split their time between working from home and office. This meets employee lifestyle requirements whilst allowing companies to reduce their expensive commercial lease commitments.


With employees no longer tethered to the daily commute to their inner-city offices, the exodus to districts that offer enhanced home accommodation options will continue. Combined with the fact that there will be less foot traffic on the high street, property in the inner London boroughs will continue to struggle, flats in particular. 


At a micro level, one of the less publicized outcomes of the lockdown and transition to remote working has been the effect on London property values within close proximity to a tube station. Pre-pandemic, being situated close to a tube station was a highly valued property attribute. Research by real-estate agent Benham and Reeves earlier this year found that in the preceding 12 months the value of such property has fallen by 2% on average and on the Waterloo and City line by 11%.


The significant fall in demand for rental properties has implications for the sales market. With rental yields falling, prospective buyers will be inclined to play hard ball in their negotiations. If there is a surge in listings of flats as landlords look to cut their losses in the face of falling demand prices could drop sharply. The likely beneficiaries here would be first-time homebuyers.


The bottom line is this: the extension of government stimulus will help the property market ride out the economic bumps ahead. This view is supported by industry analysts and leading real-estate firms who have taken on a more positive tone post the March budget. The expectations are that the London market will experience an increase of 1-2% in 2021.


Based upon the macro and microeconomic data that we are assessing, backed up by our experience on the ground, we are bullish on the opportunities that are emerging in distinct market niches. We welcome the opportunity to share our views with you and secure the London property that meets your unique requirements.



2022 & Beyond

In the longer term one of the issues we will be carefully appraising is the anticipated redevelopment of the British high street. With non-essential retail stores closed for much of the past year due to lockdown, there has been a significant change in consumer behavior. The ONS reports that in January online sales generated a record 35.2% of total retail spending up from 19.5% a year earlier. According to a report by Alvarez & Marsal and Retail Economics in mid-2020 this trend is set to continue with 25% of UK consumers stating their intention to make permanent changes to the way they shop.


Already prominent retail brands including Topshop, Dorothy Perkins, Wallis, Burtons and Miss Selfridge have disappeared from the high street. Major department store Debenhams has also been forced to shut up shop whilst another venerable high street fixture, John Lewis, is closing stores and diverting resources online.


There are two critical property related questions stemming from the transformation of the high street. How will town planners and commercial landlords redevelop shopping precincts to draw consumers back? What proportion of these defunct retail premises will be converted into housing? Allied to this is the question concerning the conversion of office premises into retail housing. With innovation and careful assessment of community needs, this could produce vibrant town centers that provide retail and entertainment options geared for the decades ahead. In turn, this will support residential property values in surrounding neighborhoods.



Increase in Non-Resident Stamp Duty
17 Mar 2021

Effective 1 April, 2021, non-residents will be required to pay an additional 2% Stamp Duty Land Tax (SDLT) on their residential property purchase. The increase will apply to both owner occupiers and investors, freehold and leasehold properties. This surcharge is on top of the 3% additional SDLT applicable to second homes, including those whose primary residence is overseas.


The objective of this initiative is to improve housing affordability and encourage first home ownership and mobility amongst existing homeowners. The revenue raised will be used to alleviate rough sleeping. The government's 2020 Budget forecast that an additional £250m in SDLT would be generated in 2020/21 as overseas investors rushed to beat the deadline before plunging £355m in 2021/22. Across 2022-2025 an additional £240m1 was forecast to be raised.


The definition of residency related to this legislation does not encompass nationality, citizenship or residence status within the bounds of the UK Statutory Residence Test. Similarly, ‘right to reside in the UK’ status or any of the UK's visa policies, including those for British National Overseas (BNO) passport holders is not relevant for the purpose of establishing whether a buyer is non-UK resident in relation to the transaction.2


The critical determinant is whether individuals have been present in the UK for at least 183 days in the 12 months preceding their property purchase. If not, they are deemed to be non-residents for the purpose of the transaction. However, persons who have paid the surcharge may be eligible to claim a refund if they have spent 183 days continuously in the UK over a 365-day period in the 12 months before or after purchase.


Obviously, the objective of this surcharge is to put the brakes on overseas investment in UK residential property. This begs the question: Are offshore buyers responsible for overheating the property market and squeezing out local buyers? There is no disputing the fact that they are here in numbers. In 2019 the leading real-estate firm, Hamptons, estimated that 18% of London landlords were based overseas. This figure is backed up an authoritative study by the University of York Centre for Housing Policy3 which estimated that over 2014-16 that 13% of London's new-build properties were bought by offshore buyers. In 2016 alone, the figure had jumped to 17.9%.


But dig a little deeper and the picture becomes more complex. Firstly, as this study shows, international investors are more predisposed to purchase property in the higher cost precincts of Prime Central London (PCL) and Inner London. The City of Westminster provides a useful case study, with offshore buyers comprising 37.9% of total sales in the borough, more than twice the 18% benchmark average.


The variations in purchasing behaviours between local and offshore buyers is also evident in the price segmentation data. Looking at the cohort of UK domestic buyers in isolation only 7.7% of total sales are in the £1.0m-£5.0m range. For international investors the figure jumps up to a substantial 16.2%.


Finally, the study confirmed that offshore buyers are active in the new-build market, typically buying off the plan. These investors often buy with the intention of holding onto the property for two-three years during the construction phase before on-selling at a profit. By selling the property prior to contract exchange they avoid the payment of SDLT (including the SDLT surcharge).


Whilst not all international investors will be buying property off-the-plan, it is questionable to what extent this cohort is responsible for squeezing out first-time home buyers. What we do know is that the SDLT holiday introduced in mid-2020 contributed to a surge in market activity that drove up property prices UK-wide by 8.5% last year. It is this rise in property values which will be making it more challenging for first-time buyers to get a foothold on the property ladder.  

  1. HMRC: New Rates of Stamp Duty Land Tax for non-UK residents from 1 April 2021, 21 July 2020
  2. HMRC: Rates of Stamp Duty Land Tax for non-UK residents, 8 March 2021
  3. University of York, Centre for Housing Policy: Overseas Investors in London's New Build Housing Market, June 2017.

Budget Fillip for Housing Market
3 Mar 2021

The Chancellor, Rishi Sunak, confirmed on 3 March in his Budget address to Parliament that the Stamp Duty Land Tax (SDLT) holiday would be extended beyond the end of March. This had been widely anticipated (Stamp Duty Holiday Extension, 19 February, 2021) with industry pundits predicting an extension til the end of May.


The outcome delivered by the Chancellor surprised on the upside with the current provisions, in force since 8 July, 2020, to be maintained through til 30 June. There follows a further three month tapering that will benefit those buyers purchasing residential property in England up to £250,000 in value. The Chancellor noted that the extension “was to smooth the transition back to normal - and we will only return to the usual level of £125,000 from 1 October”.


The SDLT rates are as follows:

Property Value

8/7/20 – 30/6/21

1/7/21 – 30/9/21

1/10/21 onwards

< £125k




£125,001 - £250,000




£250,001 - £500,000




£500,001 - £925,000




£925,001 - £1,500,000









Early in the new year the government found itself under increasing pressure from sectors of the housing industry to extend the SDLT holiday. At the time the government showed little appetite for reacting favorably. The standard line trotted out was that the initiative was only intended to be for a limited time. So, what changed in the intervening two months?


Firstly, the government would have been concerned about the financial impact, both at an individual level and in aggregate. At stake is a £15,000 saving on a £500,000 purchase. Rightmove estimated that 100,000 homebuyers were at risk of missing out on the windfall if the March deadline remained fixed. Viewed in broader context, Rightmove estimated in early March that 628,000 sales had yet to complete and that approximately 20% of sales from when the scheme was launched back in July 2020 had yet to complete. 


As Rightmove data showed, the problem was the time it was taking for sales to complete. On average it was taking 65 days from property listing to offer acceptance and a further 126 days to reach legal completion. The challenge for property surveyors, conveyancers and loan companies of processing the increased volume of sales was compounded by the protracted lockdowns and work from home provisions.


It is also probable that the government deliberately held back the announcement til the Budget was released in order to frame this initiative as part of the broader pandemic related package of fiscal relief. The other factor that would have weighed on the Chancellor's mind was that the SDLT holiday was largely held responsible for the average price of UK property surging by 8.5% in 2020. With fears already in evidence that property prices are set to fall in 2021 as this artificial stimulus is withdrawn, the government would have been concerned that an earlier announcement would further overheat the market.


This risk will be compounded by the Budget announcement of another government-backed 95% Help to Buy mortgage guarantee scheme for properties valued up to £600,000. This scheme will be open to all buyers, not just first home buyers.

Reboot of Mortgage Guarantee Scheme
3 Mar 2021

The Chancellor, Rishi Sunak's, announcement of the extension of the Stamp Duty Land Tax (SDLT) holiday wasn’t the only significant initiative targeting the property market in today's Budget. In support of UK Prime Minister, Boris Johnson's, ambition to “turn generation rent into generation buy” a revamped Mortgage Guarantee Scheme was heralded.


Commencing in April 2021, the scheme is largely modelled on the Help to Buy scheme launched in 2013. The scheme aims to encourage home ownership for those with deposits as low as 5%. The backdrop to the introduction of this initiative is the collapse in high Loan to Value (LTV) mortgages over the past year. In February 2021 there were only five 95% LTV mortgage products available compared to 4051 just 12 months earlier.


The government's view is that the contraction in high LTV products is a reaction to tightening credit conditions associated with the pandemic rather than structural in nature. For this reason, the scheme is scheduled to end on 31 December 2022 although it will be reviewed before that date to determine whether there is a requirement for it to continue.


Under the provisions of the scheme, participating lending authorities are able to purchase a government guarantee on the portion of the mortgage between 80% and 95%. In the event of a borrower getting into financial difficulty and their property being repossessed the government will largely compensate the mortgage lender for that portion of their losses. Mortgage eligibility criteria includes:

  • It must be a residential mortgage, not for second homes or Buy to Let (investment) purposes
  • Loan to Value ratio of between 91%-95%
  • Property must be located in the UK up to a value of £600,000
  • Be a repayment mortgage and not interest-only.

The government has also specified that all participating lenders will be required to offer a five-year fixed-rate product as part of its guaranteed range of mortgages. This is designed to provide borrowers with certainty in their repayment schedule in the short term.


In announcing this initiative, the Chancellor confirmed that several major high street banks are poised to begin participating from mid-April including Lloyds, NatWest, Santander, Barclays and HSBC. The government will be hoping that it is as successful as the earlier scheme which increased the number of high LTV products from 43 in October 2013 to 261 in June 2017.2


Notwithstanding the Prime Minister's targeting of millennials who are struggling to save the deposit for their first home, the scheme takes a deliberately broad-brush approach. So, it is open to all creditworthy buyers not just first-home buyers and its scope extends to established homes as well as new-build properties.


One of the creditworthy metrics relates to loan-to-income requirements. UK lending institutions cap this at 4.5 times income for the calculation of a mortgage. They will also perform an affordability assessment based upon an applicant's personal and living expenses. Due to these credit constraints, it is more likely that the Mortgage Guarantee Scheme will be of greater assistance to applicants outside of London and other expensive districts.


Allied with the extension to the SDLT holiday, the indications are that the UK residential property market will experience robust activity and strong growth in the first two-three quarters of 2021 at least. Of course, the fragmented London market will continue to experience variable results.

  1. Moneyfacts
  2. Moneyfacts Treasury Report

Stamp Duty Holiday Extension?
23 Feb 2021

The surge in activity and prices in the UK property market in the second half of 2020 were driven, to a large degree, by the Stamp Duty Land Tax (SDLT) holiday introduced on 8 July 2020. This raised the tax-free threshold on residential property purchases from £125,000 to £500,000. At the upper limit, this resulted in a £15,000 saving for property buyers.


The scheme is currently due to expire on 31 March 2021 but the government has been under pressure to extend it, a public petition having garnered more than 150,000 signatures by mid-February. The government has been steadfast in its view that the scheme would terminate on the scheduled date but the Chancellor is now reported to be considering a six-week extension to prevent tens of thousands of potential home buyers ‘falling off a financial cliff edge’. Any change to the scheme is likely to be announced in the Chancellor's budget statement on 3 March.


Zoopla estimates that approximately 740,000 buyers who agreed sales between May and December 2020 have either already locked in the stamp duty saving or will do so before the March deadline. The BBC reports that the nine-month scheme will cost the Treasury £3.8bn.  A six-week extension would provide an additional 120,000-160,000 buyers with the opportunity to complete at an aggregate saving of £1bn.


The primary issue that protagonists of extending the deadline are focused upon is the potential for hundreds of thousands of buyers who have already agreed sales to miss out on the stamp duty savings. Rightmove estimates that 100,000 buyers who agreed to a purchase last year are set to miss out whilst Zoopla forecasts a more conservative 70,000. To put these numbers in perspective, prior to the 3rd national lockdown more than 536,000 agreed sales had progressed to completion yet 420,000 agreed sales from 2020 were yet to complete according to Rightmove.


The problem is that the average transaction is taking 20 weeks to complete, a significant increase on the 12 weeks pre-pandemic. The delays are being caused by the sheer volume of transactions and the challenge of remote working in lockdown. The major bottlenecks are in the conveyancing and mortgage application processes.


Calls for the holiday to be made permanent or for the tax to be scrapped completely need to be viewed in the context that Treasury collects £12bn per annum from SDLT which represents 2% of total government revenues. With the government budget deeply in deficit, that is simply not going to happen. Whilst this six-week extension would occur too late for new buyers to take advantage of it there are concerns that it will further heat up the market and lead to a bigger hangover when it winds up.


For this reason, there is support amongst some MPs and industry players for a tapered end to the scheme to be introduced. This would allow people who had already reached a certain stage in the home buying process to complete their sale inclusive of the stamp duty saving.


As documented in our annual review, the stamp duty holiday and furlough scheme that put a floor under employment numbers have been instrumental in not just protecting the property market from a sharp correction but in creating the buoyant circumstances of the past year. The challenge for government is how to wean the broader economy and the property market in particular off these stimuli without precipitating a hangover.

London Property Prices Cool
23 Feb 2021

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.

London's Disappearing Populace
23 Feb 2021

The Government's Office for National Statistics (ONS) forecast for London's population to hit 9.8m in 2025 has been cast into serious doubt by the events of the past year. According to the government funded Economic Statistics Centre of Excellence almost 700,000 foreign-born residents may have left the city since the pandemic reached Britain's shores. This is equivalent to 8% of the population.


This is backed up by an estimate from the global consulting firm, PWC, that London's population could fall by more than 300,000 in 2021. This contraction marks the first annual decline since 1988, ending decades of growth built upon London's emergence as a global financial center, second only to New York City.


In the midst of the deepest recession in 300 years official figures reveal that unemployment across the UK is rising fastest in London. The hospitality, leisure, retail and travel industries which have relied heavily upon migrant labor have been hit hardest by the pandemic. But its not just the economic malaise associated with the pandemic that is driving this contraction in population.


Since the 2016 Brexit vote net European Union (EU) migration to the UK has been in decline and could turn negative this year for the first time since the early 1990's. Post Brexit, the UK Government introduced a new points-based immigration system raising the barriers for would-be migrants. With the vaccine rollout progressing smoothly there is a body of opinion that this mass of people will return to London as the economy emerges from lockdown. But the real picture is more complex.


One of the outcomes of Londoners working from home during lockdown was a serious reappraisal of their property requirements. As homes became so much more than just a place to relax and sleep, and the realization set in that remote working opened up the opportunity to move out of the city, Hamptons International reported that 73,950 Londoners bought homes outside the capital in 2020. This perspective is reinforced by a survey six months ago by the London Assembly which found that 4.5% of Londoners, approximately 420,000, said that they would definitely move out of the city within the next 12 months.


This population exodus has produced a sharp drop in demand for rental properties in central London with landlords commonly reducing rents by 25% to attract tenants. The inevitable knock-on effect is that those with any serious level of debt may struggle to cover their costs with the real prospect of a ‘fire sale’ of Build-to-Let (BTL) flats hitting the market. As we referenced in our annual review, the market for London flats in 2020 had already been negatively impacted by changing consumer preferences and the absence of international investors.


Reflecting on this scenario, Neal Hudson, a leading UK housing market analyst, commented that “We could definitely see that happening in new-build markets such as Nine Elms”1, referring to the huge redevelopment project near Battersea Power Station.


It is clearly too early to know whether this population contraction is symptomatic of a broader trend, last seen in the years post World War 2 when London's population declined from 8.6m in 1939 to 6.8m in the early 1980's. What is clear is that in the fragmented London property market that 2021 will provide dynamic investment opportunities.

  1. Financial Times, 22 January 2021: What London's falling population means for the housing market.

UK Holmes - 2020 UK Property Survey of Hongkongers
20 Dec 2020

The launch of the British National Overseas (BNO) visa scheme to 5.4m eligible Hongkongers was forecast to attract 150,000 applicants in the first year. By mid-April 2021, just 10 weeks post launch, the UK government was well on the way to achieving its target with 35,000 applications registered. This result is consistent with the findings of a 2020 UK Holmes survey of Hongkongers intending to purchase property in the UK.


Of the approximately 600 respondents, 81% indicated that they were considering applying for the BNO visa. However, this strong interest in forging a migration route to the UK did not necessarily translate into an immediate intent to purchase a property for owner-occupation purposes. On the question of primary purpose in buying a UK property we found:

Primary Buying Objective


Investment purposes only


Initially investment, potential to occupy later


Occupy for self/family


Occupy for child at university





The backdrop to this question was that 45.2% of respondents were intending to purchase a UK property within the next 12 months, 27.8% within the next one to two years and the remaining 27% in two years plus.


We learned that the majority of respondents were intending to make their property purchase with an eye to the long-term. On the question of how long they anticipated owning this UK property we discovered:

Property Ownership Tenure


<3 years


3-5 years


5-10 years


10+ years





The single largest demographic represented was 40-49 years (40.6%), followed by those in the 30-39 band (28.8%) and then those aged 50-59 (16.7%). The majority are married (68.5%) or co-habiting (12.1%) and nearly three quarters (71%) have at least one child. Our audience was well represented in the occupations of finance (13.7%), business management & administration (13.5%), information technology (11.1%) and sales & marketing (10.6%).  They are typically well-remunerated:

Annual Household Income




HKD750k – HKD1.0m.


HKD1.0m. – HKD1.5m.


HKD1.5m. – HKD2.0m







Upon further analysis we uncovered a significant distinction on this metric between those intending to purchase in London or elsewhere in the UK. Taken as a subset, 34.4% of those looking to buy a home in London earn in excess of HKD1.5m. compared to just 13.2% of those purchasing in other UK cities. Given that London is the most expensive real-estate precinct in the UK with an average property price hovering around the £500k mark, this outcome is not surprising.


Approximately four in five respondents either own their home in Hong Kong outright or are in the process of buying it. Of the 35% who own an investment property, the majority (61.4%) had purchased in Hong Kong with the UK being the next most popular destination (28.2%) followed by Australia (14.8%) and Singapore (13.4%).


Consistent with our findings that higher income earners are gravitating towards purchasing in London, we were also able to establish that those looking to buy in London are anticipating having to pay more. The respective target property values of the two cohorts were:

Target Property Value


Other UK Cities




£300k - £500k



£500k - £750k



£750k - £1.0m.



£1.0m. - £1.5m.










Whilst respondents were generally clear on the question of which city in the UK they were considering purchasing in, only 17.8% had a specific precinct or district in mind. The primary factors influencing their choice of location were financial benefits (35.7%), school access (26.1%) and environment & neighborhood (21.7%).


On the question of what style of property our respondents were likely to purchase, there was a relatively even spread of responses:

Proposed Property Style


Flat – purpose built


Flat – part of converted house


Terraced house


Semi-detached house


Bungalow (freestanding house)


Those intending to buy in London were more inclined to purchase a purpose built flat (57.6%) compared to those looking elsewhere (51.9%). For the cohort intending to apply for a BNO visa, the results were skewed in favor of either a terraced house (61.4%) or semi-detached house (62.8%). The corresponding figure for those not applying for the visa was 42% for each housing style.


Overall, 26% of respondents indicated a preference for buying off-the-plan whilst 62.5% were in favor of buying a completed new build property. But the highest response recorded (75.5%) was for those buying an established property. Those Hongkongers who already have an investment property in the UK have a greater propensity to buy off-the-plan (45.5%) compared to those without direct experience in the UK market (26.8%).


On the question of how they anticipate buying property in the UK, the following responses were recorded:

Preferred Method of Buying Property


New development launch in Hong Kong


Hong Kong real-estate firm


UK real-estate firm


Hong Kong property buying agent


UK property buying agent



For those intending to buy property in London, the positive sentiment expressed for using a UK property buying agent climbs to 80.8%. By contrast, for those looking to buy in other UK cities the number is a more modest 52.8%. Given the complexity of the London property market, this value judgment on the part of those respondents intending to purchase a home in the national capital is intrinsically sound.



The picture that emerges from this survey is one characterized by middle-class Hongkongers astutely assessing their property investment options in the UK. Whilst a significant majority of respondents indicated that they intend to apply for the BNO visa, for most Hongkongers the purpose in buying a UK property is primarily for investment purposes, at least in the short term.


The London property market is a renowned safe haven that through political, economic and social turmoil attracts investment globally. In the aftermath of the 2016 Brexit vote astute offshore investors snapped up property in Prime Central London (PCL) at discounts of up to 30% factoring in reductions off the asking price and favorable exchange rate movements.


The overwhelming majority of those looking to buy property in the UK are home-owners in Hong Kong, with a significant minority also owning investment properties. One of the questions which would-be migrants to the UK via the BNO visa will face is whether they hold onto their property holdings in Hong Kong.


In making this decision, there are a range of issues that need to be considered: the accommodation needs of family members remaining in Hong Kong, the potential to return home at a point in the future and, of course, financial considerations related to cashflow requirements and future capital gains. It is a complex picture that requires careful consideration. As part of this process, they would be well advised to talk to a UK based taxation accountant to understand the local regulatory environment.


The survey found that Hongkongers looking to invest in the UK are considering a variety of property styles and purchase options. Terraced and semi-detached homes were as popular as flats with those intending to buy off-the-plan being in a minority. This outcome is likely skewed by one key factor: the high percentage of respondents who are considering migrating to the UK.


The London property market in 2020 was a picture of distinct contrasts. Generally, Outer London boroughs prospered at the expense of those in Inner London. Similarly, the value of homes that offered enhanced living and outdoor space flourished whilst the market for flats was depressed. One of the key drivers was the experience of homebuyers working from home through lockdown. But there were a variety of other factors that produced a patchwork quilt of property winners and losers across the London market.


On the question of how Hongkongers intend to buy their UK property, there was a notable schism on two key metrics: geography and industry profession. In both instances, a clear preference was communicated. Survey respondents expressed a desire to deal with UK based representatives and favored seeking the assistance of a property buying agent rather than real-estate agents.


The legal mechanics of the UK property market are different to those of Hong Kong. This is potentially one of the factors intuitively represented in the response of the 81% of Hongkongers whose intention is to engage a UK property buying agent in buying their London home. Whilst they are likely to be experienced in financial markets and savvy property investors, they recognize that leveraging independent, local market expertise is critical to achieving their London property goals.


UK Holmes gratefully acknowledges the assistance of the 597 Hongkongers whose input formed the basis of these key insights.



About UK Holmes
UK Holmes is a London-based residential property buying agent providing turnkey solutions for offshore buyers. UK Holmesemploys London’s House Detective, a property professional with 12 years’ experience. His in-depth knowledge of how to successfully navigate the complexities and pitfalls of the London market to find customers their ideal home provides true peace of mind. To learn more, please visit