Demand rises in prime London housing market as Covid continues to influence buyer location

LaToya Harding
·4-min read
LONDON, UNITED KINGDOM - 2020/10/28: A 'For Sale' and 'Let' estate agent boards are erected outside house in London. (Photo by Dinendra Haria/SOPA Images/LightRocket via Getty Images)
LONDON, UNITED KINGDOM - 2020/10/28: A 'For Sale' and 'Let' estate agent boards are erected outside house in London. (Photo by Dinendra Haria/SOPA Images/LightRocket via Getty Images)

The number of homebuyers looking to buy property in prime London locations climbed during the fourth quarter of last year, according to new data.

Research by lettings and estate agent Benham and Reeves revealed that demand for all homes above £2m ($1.5m) climbed by a total of 2% in the final quarter of 2020, while demand for homes in the £2m to £5m price threshold was up 3.7% between the third and fourth quarters of last year.

The £5m to £10m segment of the market recorded the largest buyer interest increase during the period, with demand for homes at this price threshold climbing by 4.8% compared to the previous three months.

However, the research showed that demand across London’s £10m+ market stalled in the final quarter of 2020, with demand falling -0.3% to 6% overall.

The data analysed market demand based on the number of homes sold as a percentage of all properties for sale across London’s prime neighbourhoods and across various price thresholds. Demand was sourced from property listings across Zoopla and Rightmove in December 2020.

Despite growing market activity levels, COVID-19 is still a concern amongst buyers, with outer areas in the capital with more green space continuing to register the highest interest.

READ MORE: How the new lockdown may help the UK housing market in the short term

The 5 top-ranking areas of London were Barnes (47%), Chiswick (43%), Clapham (43%), Richmond (36%), Wandsworth (34%), with Wimbledon (32%), Putney (29%), Islington (29%) and Highgate (27%) following behind. These all ranked as the most in-demand areas for current London buyer demand above the price of £2m.

Holland Park is the only prime central area to make the top 10 with demand currently at 18%.

In contrast business district Canary Wharf was the least in-demand location at just 2.4%.

Marc von Grundherr, director of Benham and Reeves, said: “A combination of the stamp duty holiday and an incoming increase to stamp duty for foreign buyers caused buyer demand across London’s high-end market to largely stabilise during the final quarter of 2020.

All but the very top tiers of the market enjoyed a boost in market activity despite the broader turbulence that remained due to the current pandemic.”

He added: “The growing availability of a vaccine should spur a return to normality of sorts. As it does, we expect to see demand across London’s more central prime neighbourhoods start to return as the capital begins to reopen both professionally and from a social standpoint.”

READ MORE: UK house prices expected to be higher in a year despite crisis

The news came just days after UK lenders approved a record number of new mortgages in November, reaching all time highs since the start of the financial crisis in August 2007.

Bank of England data showed on Monday that UK mortgage approvals hit 104,969 in the month, up from 98,338 in October, beating expectations of a slowdown in the housing market boom amid the economic downturn.

The total for the first 11 months of 2020 now stands at around 715,000, just shy of the levels reached in 2018 and 2019.

The rise in demand was propelled by the stamp duty holiday, which expires at the end of March and is worth up to £15,000 ($20,000) to homebuyers.

Net consumer lending dropped by £1.5bn in November, roughly in line with forecasts, as spending opportunities were curbed due to the closure of non-essential retailers. This brought the total amount of debts repaid since the start of March at £17.3bn.

This was 6.7% lower than the same month the year prior, the biggest drop since monthly records began in 1994.

Households deposits also surged by almost £18bn in November, but there were significant withdrawals from National Savings and Investment accounts. Business deposit flows remained strong at £5.3bn and deposit interest rates remained at historically low levels.

Watch: Why are house prices rising during a recession?