The real estate market in London is known to be one of the most dynamic in Europe. As a global financial center, the city attracts local and international real estate investors. However, with inflation at 10%, rising interest rates and global economic uncertainties, the London real estate market has taken a hit in recent months. Economists are even talking about a coming recession and property prices have fallen by an average of 1.1% year-on-year in the UK. The real estate market across the board has therefore slowed down. So what does the real estate market look like in London in 2023? In this article, we will look at the current trends in the real estate market in London, the most popular neighborhoods and the different factors to consider when buying a property in the British capital.
The real estate market in London: trends in 2023
The real estate market in London has grown rapidly over the past decade. Prices have risen exponentially, especially in the city's central districts. But the real estate market in London is slowing down this year. Economic uncertainty, inflation and rising interest rates are having an undeniable impact on the real estate sector. However, the demand for residential properties remains strong, especially for small apartments and houses with gardens. At the same time, demand for high-end properties in the most expensive areas such as Knightsbridge and Mayfair is also increasing thanks to the arrival of new foreign investors in the market.
Property prices have fallen by 1.1% over the last twelve months in the United Kingdom. This is the first significant decline since June 2020, when the country was in full lockdown. According to some experts, it is also the largest decline observed in more than a decade. This weakness of the real estate market in London is quite recent as it began at the end of September ‘22 with the triggering of a massive and unfunded budget announced by the former government of Liz Truss concerning the British debt markets. This budget had scared investors, who preferred not to invest in British debt and assets, leading to a surge in interest rates in the United Kingdom and by extension; turbulence in the housing market.
As of 1 April 2023, according to Properstar data, average London housing prices were GBP 9,973/m² for an apartment and GBP 12,316/m² for a house. Depending on the type of property desired, potential buyers could plan to pay the following prices:
For an apartment:
- Studio : 977 179 GBP
- 2 rooms : 1 272 019 GBP
- 3 pieces: 2 303 584 GBP
- 4 rooms: 7 305 984 GBP
- 5 rooms : 6 480 156 GBP
For a house:
- 4 rooms: 3 339 228 GBP
- 5 pieces: 1,306,232 GBP
- 6 pieces: 4,634,723 GBP
The outlook for the London real estate market in 2023
As discussed in the previous paragraph, the UK economy appears to be heading for recession,which could prevent the property market from catching its breath and momentum in the coming months. Experts expect the fall in prices (already started at the end of 2022) to continue for some time. In addition, real estate developers are also noticing the cooling of the market, which is generally felt in the new real estate market in Europe.
However, conditions could change and the situation could be reversed if inflation falls, as expected by economists. Less inflation equals a revival of purchasing power and stimulation of the real estate market.
As London is an attractive and dynamic city, forecasts remain positive for the London real estate market in 2023 and beyond. We can expect an increase in demand for residential properties. The trend of remote work is expected to continue, leading to an increase in demand for buying goods on the outskirts of London. At the same time, demand for high-end properties is also expected to intensify, especially in exclusive areas of the city, thanks to foreign investors. It should also be noted that for several years in London, the simple fact of being an owner enriches more than a whole year of work. According to official figures from the Land Registry and the Office for National Statistics, in 2022 the average price of real estate increased by 10.3%. Based on a median price, an owner could expect £28,000 in profit if his property was resold, more than an average British salary.
Where to invest in London in 2023?
If you want to invest in property in London in 2023, it is best to focus on small apartments and houses with gardens if your goal is to have a rental investment. Indeed, this type of property should continue to be in high demand. You also need to be willing to pay a high price for high-end properties in exclusive areas of London.
When it comes to neighborhoods, London has many popular neighborhoods for buyers and investors. The most sought-after neighborhoods include Kensington, Notting Hill, Chelsea, and Hampstead. These central neighborhoods offer many amenities and nearby shops, but they are also among the most expensive. If we look at the areas in east London, such as Shoreditch and Hackney, they are also very popular with buyers and investors. These areas are more alternative and have many trendy restaurants and bars, as well as green spaces that are very popular with Londoners.
London offers a wide variety of property types. Apartments are the most common property, especially in the central districts of the city. Townhouses and terraced houses are also plentiful, especially in the residential areas of west London.
Also be aware that property prices in London are influenced by many factors. Location is undoubtedly one of the most important factors. The central districts of London are obviously the most expensive, especially those located near Hyde Park or the Thames. The size and type of property are also factors to consider. In addition, economic factors, such as inflation and interest rates, also affect property prices. So you have to know how to make the right calculations before you start and be accompanied by a real estate professional who will guide you throughout your buying process.
In conclusion, the real estate market in London in 2023 is slowing down and is mixed. However, forecasts for the coming years remain positive, with demand for residential and high-end properties expected to increase in the UK capital.
