Published: 24/11/2021
Property prices expected to rise by up to 10% in 2022The London property market seems to have got its mojo back after a bleak couple of years, and analysts are forecasting price increases of up to 10% in some areas as we enter a post-pandemic era. The lettings sector, traditionally a leading indicator for the market, has seen record levels of activity since the summer and strong price gains as stock levels have fallen.
Buyers appear to be taking the threat of rising interest rates in their stride, accepting this as an inevitable feature of the market next year which they need to price into their expectations. Pressure on prices in inner and central London boroughs during the long months of the last two years has resulted in properties starting to look like relatively good value again, and anecdotally some buyers are realigning their sights from outer to inner London. Having been outbid in the suburbs, suddenly the urbs starts to look more attractive again.
There is however still a lot of post-pandemic demand for the suburban and rural idyll, and whilst we expect to see inner London prices start to creep up again, fuelled by a return to living and working in the inner city, prices in the outer boroughs are likely to continue to rise.
The premium for property in inner London has shrunk to 33% from 50% in 2013, with the average inner London price now at £574,335, compared to £430,358 for outer London. This follows over two decades of increasing popularity and rising prices in inner London, from 1995 when the prices were almost at parity (the average inner London price was £78,252 vs £72,959 in the outer boroughs).
We can expect to see the 33% premium narrow further until stock levels improve in outer London and the market stabilises. In the meantime, inner London property is looking like good value and is starting to tempt investors back into the market.