London’s housing market has emerged as the front-runner in property price increases across the south of England. This shift marks a dramatic change from the pandemic-induced “race for space” that saw city dwellers fleeing for more room in the suburbs and countryside.
Recent data from the mortgage lender Nationwide highlights a robust recovery in London’s property sector. In the first quarter of the year, house prices in London surged by 1.6%, a stark contrast to the 2.4% drop observed in the final quarter of 2023. This rebound has pushed the average price of a London home to an eye-watering £519,505.
This resurgence is particularly notable when compared to the stagnant or declining markets in the surrounding regions. For example, the Outer Metropolitan area, known for its commuter towns encircling London up to the M25, saw a 0.6% decrease in property prices. Similarly, the broader south-east region experienced a 1% fall, with East Anglia and the south-west facing declines of 1.3% and 1.7%, respectively. Meanwhile, the national average climbed modestly by 1% to £260,791, recovering from a 2.3% slump in the previous quarter.
A Shift in Preferences
The pandemic era witnessed a significant transformation in buyer preferences, with a surge in demand for properties offering more outdoor space and additional rooms for remote work. This trend hit London’s market hard, especially the demand for flats, as people sought greener pastures in the suburbs and even further afield. Places like Cornwall, once a hotbed for post-COVID migration, are now seeing a reversal, with property prices dropping by 1.3% in December.
The Office Calls Again
The recent shift in dynamics is attributed to the growing pressure for employees to return to office work, leading many to reconsider their dreams of countryside living. According to Matt Thompson from Chestertons, “In March, the property market witnessed steady demand from buyers although some house hunters decided to pause their search in the hope for major incentives to be announced in the Spring Budget. As this wasn’t the case, the majority of these buyers have since resumed their property search. As a result, March concluded the first quarter of the year with a busy property market — particularly in the capital where demand continues to outstrip supply.”
Regional Disparities
While London steals the spotlight, the North of England showcased the strongest performance in terms of annual price growth, which spiked to 4.1% in the first quarter.
Economic Factors at Play
Nationwide’s Chief Economist, Robert Gardner, pointed out that UK house prices dipped by 0.2% in March, after adjusting for seasonal effects. However, the annual rate of house price growth edged higher to 1.6% in March, up from 1.2% in February. This mixed picture underscores the ongoing impact of high borrowing costs, tempering the pace of price increases even as the market regains momentum.