London Residential Review - Q2 2021 - Transactions surge in March Rental declines bottom out - Knight Frank
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Transactions surge Rental declines Latest five-year
in March bottom out forecast
London
knightfrank.com/research
Residential
Review
Q2 2021
P R I M E LO N D O N S A L E S M A R K E T I N S I G H T
Record breaking activity lays the ground for sustained momen-
tum into the summer as the economy reopens
3.5%
Smallest annual decline in prime
March proved to be a record-breaker Heathrow were down 83% on an
central London prices in March 2021
in the capital’s sales market. annual basis in March).
since the start of the pandemic
While January and February saw Consequently, the number of
high levels of transactional activity transactions in prime central London
and strong buyer demand, the
combination of a stamp duty holiday,
(PCL) was the highest it has been
since March 2016, combined LonRes
2%
Forecast increase in prime central
positive economic data and the pace and Knight Frank data shows. There
London prices in 2021, revised down
of the vaccine roll-out, saw March’s was a spike in activity in March 2016
from 3% due to enduring international
activity reach a new level. ahead of a 3% stamp duty surcharge
travel restrictions
March saw the highest number that was introduced the following
of exchanges, offers made, offers month.
accepted and new prospective buyers
registering with Knight Frank, in 10
Removing that anomaly, the last
time sales volumes were as high in
83%
Decline in passenger numbers at
years in London. PCL was July 2014, six months before
Heathrow airport in the year to March
It also saw viewings and market a stamp duty increase in December.
valuation appraisals move ahead of In prime outer London (POL),
the five-year average for the first time transaction numbers also climbed
in 2021, after a period characterised to their highest level since March
by limited supply, as sellers held- 2016. The previous high point was
off due to the pressures of home September 2015. Strong activity
“March saw the highest
schooling during the lockdown and levels in POL, where there is a higher
number of exchanges, offers
concerns about new Covid-19 variants. proportion of domestic buyers,
made, offers accepted and
The stamp duty holiday, initially demonstrates how the 2% overseas
new prospective buyers
due to end in March but deferred surcharge was only one of several
registering with Knight
by six months with a taper, would factors driving activity in PCL.
Frank, in 10 years.”
have been less of a motivating factor The annual price decline in PCL
in prime markets in the capital. was 3.5% in March, the smallest
However, the introduction of a 2% decline since the onset of the
stamp duty surcharge for overseas pandemic. In POL, average prices
TOM BILL
buyers from April will have driven fell by 1.4%, which was the smallest
HEAD OF UK RESIDENTIAL RESEARCH
activity despite travel restrictions decline since last February.
(passenger numbers through
1 Prime London property market most active 2 Annual price growth in prime central London and
in five years (Jan 2016 =100) prime outer London
n POL n PCL n POL n PCL
250 0%
200 -1%
-2%
150
-3%
100
-4%
50
-5%
0 -6%
Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Source: Knight Frank Research Source: Knight Frank ResearchP R I M E L O N D O N P R I C E A N D R E N TA L G R O W T H , M A R C H 2 0 2 1
P R I M E C E N T R A L LO N D O N SALES 0.1 % RENTS -3.4% 3-MONTH CHANGE
1 A L D G AT E 2 B E L G R AV I A 3 CHELSEA 4 B AY S W AT E R 5 I S L I N GTO N 23
3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE
SALES RENTS SALES RENTS SALES RENTS SALES RENTS SALES RENTS
18
-1.1 % -1.6 % 0. 4 % -1.1 % 0.0 % -1. 4 % 0.1 % - 4 .0 % 0.6 % -3.8% 5
24
7
14
6 K E N S I N GTO N 7 KING'S CROSS 8 KNIGHTSBRIDGE 9 MARYLEBONE 10 MAYFAIR
3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE
9 1
SALES RENTS SALES RENTS SALES RENTS SALES RENTS SALES RENTS 4
11
10 19
15 27
0. 3 % - 0. 9 % 0. 3 % - 5.5 % 0. 3 % -1.0 % 0. 3 % - 3 .0 % 0.0 % - 7.5 % 6
20 13 8 2
3
12
11 NOT TING HILL 12 RIVERSIDE 13 SOUTH KENSINGTON 14 ST JOHN'S WOOD 15 TOWER BRIDGE
22
3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE
16 17
SALES RENTS SALES RENTS SALES RENTS SALES RENTS SALES RENTS
- 0. 2 % - 4 .1 % 0.0 % - 7.5 % 0.0 % -1. 2 % 0. 3 % - 3 .8 % 0.1 % - 4.9% 25
26
21
28
P R I M E O U T E R LO N D O N SALES 0. 9 % RENTS -2 . 4 % 3-MONTH CHANGE
16 BARNES 1 7 B AT T E R S E A 1 8 B E L S I Z E PA R K 19 CANARY WHARF 20 CHISWICK 2 1 D U LW I C H 22 FULHAM
3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE
SALES SALES RENTS SALES RENTS SALES RENTS SALES SALES SALES RENTS
0.1 % 0.0 % - 6 .0 % 1.0 % - 0.1 % -1.0 % -2 . 3 % 0.0 % 2.2% - 0.1 % - 4 .1 %
23 HAMPSTEAD 2 4 Q U E E N S PA R K 25 RICHMOND 2 6 WA N D S W O R T H 2 7 WA P P I N G 28 WIMBLEDON
3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE 3-MONTH CHANGE
SALES RENTS SALES RENTS SALES RENTS SALES SALES RENTS SALES RENTS
0.1 % 1.5 % 1.6 % - 3 .1 % 1. 2 % -1.6 % 0. 2 % 0. 4 % -2 .6 % 7. 3 % 1. 3 %P R I M E LO N D O N L E T T I N G S M A R K E T I N S I G H T
Rental declines may have bottomed out as demand grows faster
than supply for the first time since the start of the pandemic
14.3%
Average rents in prime central 127% over the same period. Decline in rental values in the year to
London declined 14.3% in the year With the UK economy being March in prime central London
to March, continuing a pattern gradually reopened and high demand
established over the course of the for “staycations” forecast this year,
pandemic. there will be a longer-term reduction 153%
While supply has spiked due to in the quantity of stock on the long- Annual increase in prospective tenants
the closure of the short-let market, let market, which should help ease in prime central London in March
demand has been curtailed by downwards pressure on rental values.
international travel restrictions. There Meanwhile, the number of
are signs that is beginning to change. tenancies started in the first two 127%
The annual decline of 14.3% in months of this year was 5% higher Annual increase in market valuation
PCL suggests rental value declines than last year as tenants took appraisals in prime central London in
are bottoming out, as figure 3 below advantage of falling rents. March
shows. It was the smallest increment The travel restrictions that have
in the annual decline since the start of affected the sales market have also
the pandemic 12 months ago, having had a marked impact on the super-
widened from 14.1% in February. prime (£5,000+/week) lettings market
A more significant shift took place in London. There were 15 tenancies
“The annual decline of 14.3%
in prime outer London. Average agreed in first two months of 2021,
in PCL suggests rental value
rents fell by 11.4% in March, which which is the quietest start to the year
declines are bottoming
compared to 11.7% in February. It was in five years.
out. It was the smallest
the first time the annual decline had In 2020, there were 137 super-
increment in the annual
shrunk since February 2020. prime tenancies agreed in London,
decline since the start of the
Furthermore, demand grew faster a 11% decline on the previous year
pandemic 12 months ago.”
than supply in PCL last month for the (154) due to the impact of Covid-19.
first time since November 2019 (figure However, 87 of these were signed
3). The number of new prospective between July and December, making
tenants increased by 167% in March it the second most active equivalent
TOM BILL
compared to the same month last period in the last seven years, LonRes
HEAD OF UK RESIDENTIAL RESEARCH
year. Meanwhile the number of data shows.
market valuation appraisals rose by
3 Rental value declines in PCL bottom out 4 POL annual and monthly rental change
n New prospective tenants , lhs n Market value appraisals, lhs n POL monthly rental change n POL annual rental change
n PCL rental index , rhs
0%
200% 3%
-2%
150% 0%
-4%
100% -3%
-6%
50% -6%
-8%
0% -9%
-10%
-50% -12%
-12%
-100% -15%
Mar-20 Jul-20 Nov-20 Mar-21
Mar-20 Jul-20 Nov-20 Mar-21
Source: Knight Frank Research Source: Knight Frank ResearchLO N D O N A N D U K P R I C E F O R E C A ST – 2 0 2 1 TO 2 0 2 5
The stamp duty holiday and the We now expect price growth in the travel restrictions means we have
furlough scheme extentions in the UK to outperform Greater London as revised our 2021 forecast for prime
Budget in March have changed the the impact of the tapered stamp duty central London down to 2% from 3%.
landscape for the housing market holiday extension drives demand in Furthermore, when international
in 2021, and we have revised our lower-value markets more consistently buyers return there is now an
forecasts as a result. through to the end of September. additonal 2% stamp duty surcharge
We expect UK house prices to Our forecasts for prime outer in place. With no price growth due to
increase by 5% in 2021, rising from a London and prime regional markets the absence of international buyers
forecast of zero at the start of this year. have remained largely unchanged as in recent months, the surcharge has
The strength of key market indicators both areas continue to benefit from a effectively been priced in, although
in the first months of this year meant drive for more space and greenery. a period of price discovery will take
that an upwards revision was likely However, continued uncertainty place when international buyers
even before last month's Budget. around the relaxation of international return in greater numbers.
2021 2022 2023 2024 2025 CUMALITIVE
2021 - 2025
PCL 2% 7% 5% 4% 5% 25%
POL 4% 4% 4% 4% 5% 23%
PRIME REGIONAL 4% 4% 3% 3% 4% 19%
UK 5% 4% 4% 4% 5% 24%
G R E AT E R LO N D O N 4% 4% 3% 3% 3% 18%
Please get in touch with us Recent Publications
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we would love to hear from you.
The search for space Shortage of supply Post-Easter surge
in demand
The Wealth Report 2021
London Super-Prime
Lettings – Spring 2021
knightfrank.com/research
Lettings Insight
London Super Prime
Spring 2021
There were 137 super-prime tenancies There has also been an uptick are lifted, said Tom.
(£5,000+/week) agreed in London last in interest from US tenants in “We are now having conversations
year, an 11% decline on the previous recent months due to the change with owners who say they would be
year (154). of administration, said Tom. "It open to either a sale or a letting and
However, there was a marked hasn't come through in the number some strong offers are coming through
increase between the first and second of tenancies yet, but I detect rising in the sales market now,” said Tom.
James Clarke Gary Hall
half of the year due to the impact of interest from the US as questions grow The lack of supply is more of
Covid-19. In total, 87 super-prime over the tax landscape for high-net an issue in locations like Chelsea,
tenancies were agreed between July worth individuals there." Notting Hill and St Johns Wood, in
and December, the second most active One issue prospective tenants particular properties with gardens
such period in the last seven years, may face is a supply shortage, as and close to a good school. The
LonRes data shows. figure 4 shows. A fall in listings in the relative lack of properties in the NW
It underlines how demand has final quarter of last year was partly postcode underlines this (figure 4).
not been dented by the pandemic, attributable to a second national “I think tenants are still prepared
according to Tom Smith, head of lockdown in November but the to rent without outdoor space,” said
super-prime lettings at Knight Frank. growing strength of the super-prime Tom. “People are not necessarily
Head of London Sales Head of Lettings
“A big driver in recent years has sales market was another factor, as planning for future lockdowns now.
been the rates of stamp duty in more owners decided to sell rather What some are doing is splitting their
the sales market and it is still a big than let their properties. Supply portfolio between London and the
motivation for tenants,” said Tom. should increase to some degree in Country and are therefore happier to
“That rationale is still there and will coming weeks as lockdown restrictions forgo some outdoor space in London.”
arguably grow with the extra 2%
surcharge that overseas buyers will
have to pay from April.” 1 London super-prime lettings volumes and achieved rental values (quarterly)
There were 15 tenancies agreed in n Total tenancies agreed n Average weekly achieved rent (£) n Maximum achieved weekly rent (£)
first two months of 2021, which is the
+44 20 3826 0625 +44 20 7480 4474
quietest start to the year in five years, 60 £60,000
due to the impact of international
50 £50,000
travel restrictions.
40 £40,000
“Some people went away for
30 £30,000
Christmas and decided not to come
20 £20,000
back for the re-opening of schools in
March,” said Tom. “Easter is not very 10 £10,000
far away and people didn’t want to 0 £0
quarantine twice in quick succession. 2014 2015 2016 2017 2018 2019 2020
So, there are still children learning
james.clarke@knightfrank.com gary.hall@knightfrank.com
remotely but after Easter that pent-up Source: Knight Frank Research / LonRes
t h e g l o b a l p e r s p e c t i v e o n p r i m e p ro p e rt y & i n v e s t m e n t
demand will release.”
2021 — 15TH EDITION
P1 NEW YORK FO CUS 2021
Tom Bill Chris Druce New York
about the New York market
Focus 2021
Head of UK Residential Senior Research Analyst
New York Focus 2021
What does The Wealth Report 2021 tells us about who lives,
works and invests in the city and how do perspectives on
property investment in the US differ to those globally?
Research +44 20 7861 5102
Knight Frank’s annual flagship publication, The Wealth
Report 2021, is packed with data and insight on how New York is home to more UHNWIs than any other city
wealth is influencing property markets globally. A new (UHNWI (US$30 mn+)
series of focus reports delves deeper into the data to
explore what the findings mean for some of our key cities.
In this first edition, we assess the importance of New
York to the world’s wealthy, how its prime market is
faring against the backdrop of a global pandemic and
Hong Kong SAR
draw on the findings of The Attitudes Survey which sits
Los Angeles
Active Capital
at the heart of The Wealth Report to gauge where US
New York
7,743
London
ultra-high-net-worth individuals (UHNWIs) think future
Tokyo
5,235
5,042
5,507
7,743
6,611
+44 20 7861 1492 chris.druce@knightfrank.com
opportunities lie.
1 2 3 4 5 UHNWIs living in
10
Source: Knight Frank Wealth Sizing Model New York
Manhattan Condos: Signed contracts up 55% in February 2021 year-on-year
500
things you need to know 400
about the New York market
300
200
tom.bill@knightfrank.com
100
The US remains the world’s number
1
0
one wealth hub Jan
20
Feb
20
Mar
20
Apr
20
May
20
Jun
20
Jul
20
Aug
20
Sep
20
Oct
20
Nov
20
Dec
20
Jan
21
Feb
21
There are now 180,060 UHNWIs in the US, accounting for Source: Miller Samuel/Douglas Elliman
35% of the global total….and New York is home to more
UHNWIs than any other city worldwide (7,743). US wealth Currency matters How much do you
advisors were amongst the most optimistic globally with need to join the
The one-year discount in Manhattan property values taking
58% citing an increase in their clients’ wealth and a further account of price and currency changes in the year to
top 1% in the US?
42% seeing their wealth remain stable in 2020. 31 March 2021
US$
US$ £ €
New York and London tie for first place
2
4.4m
in Knight Frank’s City Wealth Index -5.1%
When it comes to where UHNWIs want to live, work and do -8.1%
business, New York and London are level-pegging at the top
of the rankings. New York leads the investment category (US$1.8m in the UK)
-13%
due to the high number of top global firms headquartered
in the city as well as strong domestic investment, whilst Source: Knight Frank Research Source: Knight Frank Wealth Sizing Model
London excels in terms of inward investment from overseas.
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range
Knight Frank Research of clients worldwide including developers, investors, funding organisations, corporate institutions and
Reports are available at the public sector. All our clients recognise the need for expert independent advice customised to their
specific needs. Important Notice: © Knight Frank LLP 2021 This report is published for general information
knightfrank.com/research only and not to be relied upon in any way. Although high standards have been used in the preparation
of the information, analysis, views and projections presented in this report, no responsibility or liability
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