What's shaping the London property market in 2023?
As a Londoner , I’ve watched property prices in our world-class city climb ever higher year after year. But rather than just looking at the headlines reporting new average sales prices, I wanted to dig deeper into the major factors at play driving London real estate economics.
In this piece, I’ll examine 9 key trends that have significantly impacted prices across London and recent shifts that alter market forces. In 2023, new dynamics are at play driven by higher borrowing costs, changing demand, and more.
Foreign Investment
London draws buyers from across the globe seeking premium properties as safe investment havens. International money pouring in drives up prices, especially for high-end new build developments. Prosperous investors from regions like Asia, , the Middle East and more have made London a go-to destination.
Housing Supply & Demand Imbalance
Simply put, demand severely outpaces supply. London’s population exploded from 7.1 to 8.9 million since 1997. New housing construction has lagged far behind this population boom. Limited availability amidst huge demand enables sellers to push prices ever higher.
Tourism & International Appeal
London’s standing as a top global tourist and business destination fuels interest in owning property here. For many foreign buyers, having a London pied-à-terre provides a home base when visiting for leisure or work. This expands the pool of buyers competing.
Prime & Luxury Market Strength
The elite top end of the market continues reaching new peaks in London. Limited stock and tremendous wealth concentrated at the top drives intense competition for one-of-a-kind trophy homes. Prime properties by definition lack supply.
Rising Mortgage Rates
As rates rise, higher borrowing costs limit purchasing power - especially for first-time buyers on tighter budgets. This cools bidding wars and price jumps seen when rates were ultra low.
Declining Demand
With affordability squeezed by high rates and cost of living, buyer demand is slowing. Some urgency has eased in the market as a result. However, supply remains extremely limited.
Construction Slowdown
Building is being impacted by materials shortages and higher development costs. The supply-demand imbalance continues with fewer new homes built than needed.
New Build Dominance
Many buyers are now prioritising lower-maintenance new build homes that are more energy-efficient. Limited supply of new construction means these properties are outperforming.
Investor Shift
Investors are moving purchases forward to complete deals before higher lending rates diminish yields on leveraged buys. However, lack of stock still constrains deals.
While other factors like low interest rates also impact London prices, these four forces largely account for the tremendous price acceleration. Understanding the why behind the numbers provides deeper insight into the London property market. For home buyers and investors alike, grasping these key drivers offers helpful perspective.
As your agent, I’m here to chat in detail about how these trends could impact your next London property purchase or sale. I’m always happy to help break down the latest market dynamics so you can make informed decisions. Just let me know how I can help!