Figures from the Nationwide suggest growth in house prices nationally averaged 24% between March 2020 and September 2022. Growth in Prime Central London values has been more modest. With the JLL Prime Central London Index recording an average of 5.3% growth, comparing Q3 2022 with Q1 2020. But while we expect growth in the mainstream market will continue to slow the outlook could be more positive for prime.
For lettings, constrained stock levels set against the usual summer peak in new lets has meant rents rose again this quarter. Up 3.5% on Q2 2022 and 10.6% annually.
Director of UK Residential Research at JLL, Marcus Dixon, explains:
“Looking ahead it is still too early to assess what impact recent government policy announcements, and the subsequent reaction from global markets, will have on the housing market. Although with interest rates rising and cost of living pressures far from alleviated, we sense increased downward pressure on both prices and activity in the year ahead.
But we don’t think this is necessarily the path the prime markets will follow. For one, purchasers are far less reliant on debt, meaning the impact of higher mortgage rates are unlikely to bite as deep as in the mainstream market. Secondly, prime central London attracts a significant number of overseas purchasers, and a weak Sterling exchange rate could lure prospective buyers into the market in the coming months. For dollar and dollar pegged currencies the case remains particularly compelling.”
Q3 2022 Sales Index
The JLL Prime Central London Index recorded growth in achieved prices again this quarter. The Q3 2022 index recorded growth of 1.0% on Q2 2022, with prices up 1.7% compared with the same period in 2021. Prices are now 5.3% higher than they were pre-pandemic in Q1 2020.
More expensive homes saw the highest annual growth, with properties priced at £10m or more rising 3.8% annually compared with growth of 1.2% for homes below £2 million. The top end of the market continues to record the strong growth compared with pre-pandemic too, with prices of £10m+ homes rising 11.1% compared with 2.4% for homes at sub £2 million.
Houses continued to outperform flats, although the gap is narrowing. Flats in Q3 2022 recorded an annual rise of 1.4% versus growth for houses of 2.8%, 1.4 percentage points difference. This compares with a 6.3 percentage point difference at the peak in Q4 2021.
Opportunities for overseas buyers
The price of Sterling fluctuated significantly in September. Bottoming out at US$1.03 but recovering after the Bank of England’s intervention to US$1.16 by the month end. Weak Sterling exchange rates means prime central London remains an attractive option for overseas buyers. Those holding dollars or dollar pegged currencies finding their money will stretch even further.
Rates prior to the Banks of England’s intervention in late September would mean those buying in dollars would pay 19% less on average for a prime central London property than they would have done a year earlier and almost 38% less than they would have paid at the peak in 2014. Chinese buyers would save almost 10% on prices a year ago and more than 27% on 2014 peak levels.
Q3 2022 Lettings Index
A year ago, the JLL Prime Central London Rental Index recorded the first annual increase in rents since March 2020, as stock levels fell, and tenants returned to the capital. With Q3 2021 showing a 6.5% annual increase in rents, we were expecting the significant annual increase in rental values we have grown accustomed to more recently would begin to recede. But growth in Q3 2022 remained in double digits, rising 10.6% annually. Quarterly rents rose too, up 3.5% in Q3 2022 compared with Q2.
Unlike the sales market, where growth was highest at the upper end, more expensive rental properties saw lower growth. Rents for properties priced at £3,000 per week or more rising 4.1% annually in Q3 2022 compared with 12.6% for properties priced at under £1,000 per week.
Marcus DixonDirector of UK Residential Research | Lucy MortonHead of UK Residential Agency |
Richard BarberDirector – PCL sales | Neil ShortDirector – PCL lettings |
About JLL | October 2022
JLL is a leading global professional services firm specialising in real estate and investment management, with $16.6bn annual revenue in 2020, operations in over 80 countries and a global workforce of over 90,000. With over 7,000 employees and 15 offices in the UK, we support our investor, developer and occupier clients at every stage of the property lifecycle across both commercial and residential asset classes. This includes land purchase, access to capital, planning, development advisory, leasing, building management and sales.
JLL’s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare and student housing.
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