London housing market report
The quarterly London housing market report summarises key trends and patterns in London’s housing market. The analysis covers topics including house prices, rents, sales and new supply. The report primarily draws on publicly available datasets.
The London housing market report is updated quarterly by analysts at the Greater London Authority. The most recent London housing market report was published in September 2021 and contains data for mid-2021. The next edition is due to be published in winter 2021.
Official data sources are usually published on a monthly or quarterly basis, with a time lag. During the Coronavirus pandemic, a number of these data sources were temporarily suspended or have had their methodologies revised, so the reports during this period use a different range of sources or provide a shorter overview than previous publications.
Private rents in London rose rapidly from Q2 to Q3 this year, rising above the pre-pandemic level, but have begun to stabilise.
Homelet data shows a 11.5% increase in rents in London in November compared to the same time last year. According to their figures, the average rent for new tenancies in London is £1,757 per month, 66% higher than the national average of £1,058. London rents rose quickly from May to September 2021, increasing by nearly 11% during that period, but have now stabilised.
• Data from Rightmove shows a rent price increase of 11.1% since November 2019 and a rise of 13.5% since the mid-pandemic dip in November 2020. In Q3, asking rents overtook pre-pandemic rates and by November they had reached 3% higher than before the first lockdown.
• Comparing rents to incomes in regions across the UK show that the rent to income ratio in London remains 2% below pre-pandemic levels. According to Homelet data, in the region with the most affordable rents, the North East, affordability is 1% below pre-pandemic levels, in line with the national average.
At 2.8%, annual house price rises in London continue to be the lowest of any English region, considerably lower than the national price
growth of 11.8%.
ONS data shows that house prices in London rose by 2.8% over the year to September 2021, down from a 6.7% increase in August. This means that London has reported the lowest house price increases of any English region for the tenth consecutive month, as the national price increase was 11.8% in the year to September. The average house price in London is £507,000, three quarters higher than the national average of £288,000.
More recent data from Rightmove shows an annual increase in house prices of 2.7% in November. Data from the last month show a typical seasonal fall in prices during the pre-Christmas period, which are in line with national figures. At 6.5% Bromley has experienced the largest annual price increase of any borough, whilst Islington has seen an annual price fall of 4.4%. Annual price growth figures show no clear pattern between inner and outer London.
Although demand in the sales market has dampened as a result of the Stamp Duty holiday drawing to an end and low confidence amongst
buyers, prices continue to moderately grow due to the low supply of homes in London.
Responses to the RICS housing market survey reported a low supply of homes for sale in October 2021, which is resulting in moderate price growth despite some uncertainty amongst buyers. Buyer’s confidence is low due to the threat of interest rate rises by the Bank of England and the rise in the Omicron variant, as well as the ending of government support schemes including the Stamp Duty holiday.
• According to UK Finance data on homemover completions, home purchases fell dramatically in Q3 as expected as the Stamp Duty holiday came to a partial end. However, the fall was less significant than previously seen post-stamp duty support schemes, and activity in Q3 remained higher than the same time last year.
• Data from the government on the Help to Buy equity loan scheme show the number of homes bought under the scheme in the first quarter of 2021 was 37% higher than the same time last year.
Since the previous quarter, sales and starts on large developments have increased as international investment returns, but completions have fallen by 30% due to rising costs and labour shortages.
• Molior figures show a fall in the yearly rolling average of starts, sales and completions on large sites in London. Despite an increase of starts from Q2 to Q3 this year, the number of units under construction at the end of Q3 2021 is 10% lower than at the end of 2020. Similarly, Q3 saw the highest number of sales of new homes in London in the last 12 months but was still 12% less than the number sold in Q3 2020.
• Since the partial ending of stamp duty relief in June, completions of large developments in London have fallen by 30%. Some projects may have been extended due to the increases in construction costs and lack of labour availability, postponing their completion dates.
• In the last 8 weeks, data on Energy Performance Certificates for new dwellings show over 6,150 new homes have been registered in London. This figure has remained steady since midJuly, after a peak of new homes being registered in March 2021.
Prices of construction materials continued to rise in Q3 but may have reached their peak, whilst shortages of labour increase pressure on
the sector and are forecasted to become the primary reason for build cost inflation next year.
• According to the BCIS Materials Cost Index the cost of construction materials has reached a 40-year high in Q3 2021, however recent surveys suggest that prices have peaked. Timber and steel have seen the largest price increases since the first quarter of 2021, rising by 79% and 77% respectively.
• Labour and skills shortages in the construction sector continue to impact projects and are expected to become the largest cause of cost pressures next year. According to Emsi, the number of online job postings for skilled construction and building trades roles in London was 15% higher in September 2021 than in September 2019.
• In order to attract construction staff, employers have been forced to raise wages in the sector. Advertised UK construction wages rose by 6.7% from February to July 2021, according to figures from Indeed.