Estate Agent Expert’s Predictions For London Market

James Hyman, head of residential at Cluttons, has given his predictions for the London residential and sales market in 2022

“From a demand perspective the central London sales market is finishing on a high, with sales volumes back to where they were earlier in the year. There has been a flurry of activity since mid-September which looks set to continue as buyers rush to buy before a potential base rate rise. This demand has been met by an increased supply of fresh stock coming to the market in the early autumn and price corrections for existing stock as owners become more realistic on pricing and acknowledge what 2022 may hold for the central London market.

“Despite increased building costs, the highest level of demand we have seen in 2021 has been for unmodernised family homes. People have come out of the pandemic wanting to be able to develop and create their bespoke home, for example last month we marketed an unmodernised house in Alexandra Park which had over 100 views and multiple offers over guide price.

“What is instore for the sales market? In the first quarter we expect demand to continue to outstrip supply but as the year unfolds, a potential interest rate increase and continued inflation could bring an element of distress to the market. Any slight interest hike will have a huge effect on household expenses many of which are fully stretched already. This distress will bring more supply, outstripping demand which will result in a fall in capital values through to 2023. However, a fall in capital values won’t see a market crash as it will lead to volume in the market which is something London has not seen since 2014.

“My advice to anyone thinking of exiting the London market is to do so ASAP, prior to Xmas or the first part of next year as we could see prices drop as much as 10% depending on the geography. If you are thinking of upgrading, then in an ideal world you would sell now and acquire in the later part of 2022 when prices have come off.

“As for the rental market, in the last quarter in some areas rental prices have increased 10% on pre-pandemic prices due to easing of travel restrictions, international student and corporate tenants returning, soaring hotel rates and companies being clearer on their return-to-work policy. We expect this demand to remain strong into the New Year, notably in January which is usually quiet as people enjoy extended Christmas breaks, however this year there is enough demand to see us through this period and Q1.”

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