The quarterly London housing market report provides insights into the trends and dynamics of London’s housing market. This report delves into various aspects such as house prices, rents, sales, and new supply, drawing data from publicly available datasets. Prepared by analysts at the Greater London Authority, the most recent report covers data for the spring and early summer of 2023, offering a snapshot of the current state of the London housing market. The report’s analysis takes into account official data sources published on a monthly or quarterly basis, with a time lag.
London Housing Market Report
Market Highlights of the Month – August 2023
1. The rate of growth in average asking rents for new tenancies in London has slowed a little in the last year but remains very high despite the cost of living crisis.
According to Rightmove, the average asking rent for new tenancies in London reached £2,567 in Q2 2023. Annual rental growth slowed slightly in Q2 to 13.7%, with growth rates in Inner and Outer London converging. Annualized rental growth in London has now been over 10% for seven consecutive quarters. HomeLet figures show that annual rental growth for new tenancies rose again to 12.5% in June, with Londoners spending an average of 37.3% of their income on rent in June, the highest figure recorded since 2014.
2. Demand for rented rooms in London continues to outstrip supply, with early signs that demand is starting to rise rapidly in line with seasonal patterns from recent years.
Figures gathered from SpareRoom.com show an increase in the number of ads placed by people searching for rooms and the number of rooms available. Recent weeks have seen a particularly rapid rise in the number of ads from people searching for rooms, matching seasonal patterns in 2021 and 2022. RICS survey respondents in June reported continued high demand for rental properties in London, driving higher rents.
3. House price growth has fallen sharply in recent months and remains lower in London than in any other region.
According to the ONS House Price Index, the average house price in London fell to £525,600 in June, with London prices rising by only 0.8% in the last year. More recent data from Rightmove shows a decrease in the average price of London homes coming to the market. Borough-level data indicates mixed trends, with Inner London boroughs seeing faster growth in asking prices and Outer London boroughs experiencing drops.
4. Demand is falling in London and across the country as a whole, pointing to further price falls to come.
In recent months, demand has fallen sharply while supply has increased, resulting in a net decrease in demand both in London and across England and Wales. The Bank of England raised its base rate to 5.25% in early August and is expected to keep rates ‘restrictive’ into 2024 in an effort to bring down stubbornly high rates of inflation.
5. Starts, completions, and sales of private units on large schemes in London have fallen in recent months, affected by factors including construction costs, high-interest rates, and the ending of the Help to Buy scheme.
One key reason for the fall in sales is the end of the Help to Buy scheme, which has been one of the largest drivers of sales over recent years. Some housebuilders have responded to falling market demand by selling new homes to affordable housing providers.
6. The prices of construction materials in the UK fell between May and June 2023, but the stabilization of prices since spring 2022 continues to hold.
The latest BEIS data shows a fall in the prices of materials used in new housing between May and June 2023, with little sign of construction material prices rising again in the near future. However, concerns about inflation of goods and services prices and a shortage of workers in the labor market persist.
7. New housebuilding in London is running at a slower pace than in the last two years.
Recent data indicates a lower number of homes completed so far this year compared to the previous two years. The Bank of England forecasts a sharp decline in housing investment, reflecting the impact of sustained high-interest rates.
As the London housing market faces various challenges and uncertainties, it is essential for stakeholders to closely monitor these trends and indicators. Whether the market will crash in 2023 or 2024 remains a topic of speculation, but these insights provide a snapshot of the current state of the London housing market.
Will the London Housing Market Crash in 2023 or 2024?
The London housing market is currently facing several challenges and showing signs of slowing growth in certain areas, such as house price growth and increased demand for rental properties. While it’s challenging to make a definitive prediction about whether the market will crash, the data suggests that there are factors at play that could impact the market’s stability in the near future.
Factors such as declining house price growth, increased demand for rental properties, and the end of the Help to Buy scheme have created uncertainty. Additionally, the Bank of England’s decision to raise the base interest rate to combat high inflation may further influence the market.
It’s essential for potential buyers, renters, and investors to keep a close eye on these market trends and consult with experts to make informed decisions. Whether the market will crash or not depends on a complex interplay of various factors and economic conditions, making it a topic of ongoing discussion and analysis.
Overall, this London housing market report for August 2023 paints a picture of an evolving landscape. While average asking rents remain high despite a slight growth slowdown, the demand for rented rooms is robust, with indications of an imminent increase. House price growth has significantly declined, and a decrease in demand suggests the potential for further price drops. Falling demand and challenges in new home sales are evident, accompanied by fluctuations in construction material prices. Overall, the London housing market faces various factors that influence supply, demand, and pricing dynamics, shaping the path ahead for the city’s housing sector.
Sources:
- https://data.london.gov.uk/housing/housing-market-report/