Foreign Buyer Return Could Boost London House Prices By £134k

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Foreign Buyer Return Could Boost London House Prices By £134k
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A return of foreign buyer demand could boost property values by £134,000 in some pockets of the capital’s property market according to the latest property market analysis by London lettings and estate agent, Benham and Reeves.

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London House Price Trends

Based on Land Registry data, Benham and Reeves analysed London house price trends in the six months since travel restrictions dampened foreign buyer activity and how this rate of growth differed from the six months prior. Benham and Reeves then looked at what a return to form may look like once travel restrictions have been lifted.

Since the UK decided to close all travel corridors from the 15th January, house prices have climbed by 2.1% across the London market. This is a 0.5% reduction in the rate of growth seen in the six months prior when prices climbed by 2.6%.

Should travel restrictions remain in place and a similar level of growth remain over the next six months, the average London house price would climb by a further £10,701. However, should restrictions lift and foreign buyers be able to return at mass, this additional 0.5% boost would see prices climb to £13,496 - a £2,795 increase in market values.

The prime central pocket of Kensington and Chelsea is due to see the biggest benefit from a return of foreign interest. In the six months prior to the travel ban, the average house price in the borough increased by 2.6%.

However, since then it has fallen by -8.2% to £1,239,831 and a similar reduction over the next six months would see a further £101,267 lost in value. In contrast, a foreign buyer revival of 2.6% in values would add £32,365 to the average house price in the borough, a total turnaround of £133,631.

Other boroughs that could benefit most from a return to pre-travel ban form include Haringey (+76,582), Southwark (+£68,705), Merton (+£41,434) and Lewisham (+£24,207).

Foreign Buyer Demand Could Further Boost London's Property Market

Director of Benham and Reeves, Marc von Grundherr, commented:

“The London market performs very independently to the rest of the UK and so while house prices have increased since the introduction of the stamp duty holiday, we’ve simply not seen the same house price boom like the rest of the UK.

Restrictions around travel and the resulting reduction in foreign buyer demand have also had a far greater impact on London compared to anywhere else across the nation and in some boroughs this has had quite a substantial impact on house prices.

There are still foreign buyers transacting and we’re seeing them utilise both our foreign offices in the likes of Singapore, Hong Kong and India, as well as virtual viewings in order to traverse the obstacles posed by current travel restrictions.

Of course, this level of market activity has obviously been more muted but we expect a strong return to normality once restrictions are eased further. Once the foreign buyer floodgates are fully open, we expect London property values to accelerate, bolstered by domestic demand as many return to the workplace, with the capital regaining the mantle where regional rates of house price growth are concerned.”

Location Current average house price (Jun 2021) Pre-travel ban market growth (6 months - Jul 2020 to Dec 2020) Potential changed based on pre-travel ban market growth applied to the current average house price* Post-travel ban market growth (6 months - Jan 2021 to Jun 2021) Potential change based on post-travel ban market growth applied to the current average house price** Foreign demand property price boost***
Kensington and Chelsea £1,350,104 2.6% £32,365 -8.2% -£101,267 £133,631
Haringey £590,212 8.1% £44,993 -5.7% -£31,589 £76,582
Southwark £543,558 6.3% £31,568 -7.4% -£37,137 £68,705
Merton £555,391 4.4% £23,386 -3.4% -£18,047 £41,434
Lewisham £443,744 4.4% £19,121 -1.2% -£5,086 £24,207
Redbridge £448,692 5.8% £26,280 0.9% £3,888 £22,392
Ealing £502,532 5.0% £25,457 1.1% £5,708 £19,748
Waltham Forest £474,700 5.9% £28,579 2.2% £10,544 £18,035
Hounslow £427,117 6.6% £28,810 2.6% £11,397 £17,414
Sutton £392,574 4.8% £19,124 0.5% £1,881 £17,243
London £499,817 2.6% £13,496 2.1% £10,701 £2,795

*Based on applying the pre-travel ban house price growth % to the current average house price (Jun 2021 - latest available)

**Based on applying the post-travel ban house price growth % to the current average house price (Jun 2021 - latest available)

***Based on the difference between the pre and post-travel ban rates of house price growth on the current average house price (Jun 2021 - latest available)

House price data sourced from the Gov.uk UK House Price Index - July 2020 to June 2021 (latest available)

Location Pre-travel ban market growth (6 months - Jul 2020 to Dec 2020) Post-travel ban market growth (6 months - Jan 2021 to Jun 2021)
AveHP - Jul 2020 AveHP - Dec 2020 Pre-travel ban market growth (6 months - Jul 2020 to Dec 2020) AveHP - Jan 2021 AveHP - Jun 2021 Post-travel ban market growth (6 months - Jan 2021 to Jun 2021)
Kensington and Chelsea £1,323,682 £1,358,236 2.6% £1,350,104 £1,239,831 -8.2%
Haringey £540,685 £584,381 8.1% £590,212 £556,723 -5.7%
Southwark £510,126 £542,112 6.3% £543,558 £503,464 -7.4%
Merton £527,457 £550,440 4.4% £555,391 £536,716 -3.4%
Lewisham £420,839 £439,185 4.4% £443,744 £438,599 -1.2%
Redbridge £416,115 £440,279 5.8% £448,692 £452,547 0.9%
Ealing £473,765 £497,498 5.0% £502,532 £508,177 1.1%

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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