Prime London bounces back - prices to soar up to a fifth by 2025

Savills has upgraded its house price and transaction forecasts following the Budget - and prime London, especially the centre, is tipped to bounce back after a torrid performance in recent years.

Prime central London is forecast to rise 21.6 per cent buy 2025 - that’s more than the forecast for mainstream UK-wide house price growth. Savills says this makes prime central London look “good value in a global and historical context after six years of price adjustments.” 

Outer prime London benefited from a flow of wealth from more central postcodes in 2020, a trend set to continue this year, but its greater dependence on domestic wealth generation points to lower five year growth of 14.8 per cent, says Savills.

The wider commuter belt and the South of England will see 21.6 per cent growth, benefitting from “lifestyle relocation from the capital” while prime housing markets in the Midlands (up 21.1 per cent over five years) and Scotland (rising 22.8 per cent in the same period) will continue to support growth from local upsizers and buyers relocating from other regions.

“Prime central London offers a real buying opportunity” says Frances Clacy, Savills residential research analyst. 

“Activity has already picked up more quickly than expected, with more £5m-plus sales last year than since 2016. It tells us that buyers believe in the future of London as a global city and supports our expectation that values will recover quickly as the city reopens for business and international travel resumes.”

Savills expects prime central London prices to start rising in the second half of 2021 and end the year with 3.0 per cent gains, followed by a strong 7.0 per cent bounce in 2022.

Across outer prime London and wider prime UK housing markets the search for space and lifestyle change are expected to remain dominant drivers in 2021, Savills says. 

“Buyer commitment to moving remains strong and longer term adaptations to home working will benefit London’s wider commuter zone” says Clacy.  

“The move to the country trend also shows no sign of slowing.  In particular, this points to a continuation of the country house revival and a demand for lifestyle relocation and second homes that will favour locations such as Devon, Dorset, Norfolk and Suffolk.”

Price sensitivity will continue to be a factor this year, Savills says, but the value gap between towns and cities and neighbouring village and rural markets, will continue to support prices in the latter.  This will lead to variations in price growth between different locations.

“Looking further ahead, the wider tax environment and any longer term implications of Brexit could impact buyer spending power in the prime markets” says Clacy.  

“The government will need to begin to recoup some of the costs of its pandemic support packages, something we might see once the economic recovery takes hold. This moderates price growth expectations later this year and through the next two years.”