Inflation may have cooled in recent months but it remains some way above the Government’s 2% target at 8.7% currently.
As a result, we’ve seen thirteen consecutive base rate increases implemented since December 2021, with more likely to materialise before the year is out.
So what impact is this having on the property market within the Square Mile? The answer, not much.
It’s no secret that the London market as a whole has trailed the rest of the UK when it comes to the rate of house price growth seen during the pandemic property market boom.
Since 2019, the average house price across the Square Mile has climbed by 12.2%, a notable increase, but one that trails both the wider London market and the UK at 12.7% and 24.4% respectively.
However, rising inflation and increasing interest rates have caused the heat to fade from the UK market as buyers struggle with the increased cost of borrowing and the wider cost of living.
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In fact, based on the average UK house price seen so far in 2023 (£286,843), the UK market as a whole has seen house prices increase by 11% since 2021, creeping up by just 1% when comparing current market values to 2022.
In contrast, the City of London has seen an 11.7% increase since 2021 when rates first started to climb, while the current average of £893,832 is also some 4.7% higher than the average property value of £853,365 seen over the duration of 2022.
Like any market, performance is varied when analysing the City of London at the most granular level.
Since interest rates started to climb in December 2021, property values across the EC4Y, EC4M and EC4N postcodes have all increased by more than 20%. However, the WC1R, WC1V and WC2A postcodes have seen reductions of between 16% and 18%.
But, enlarge, the Square Mile has not only remained resilient in the face of wider economic uncertainty, but has actually started to gain momentum in recent months.
Why? A return to (almost) normality for the post-pandemic workplace has helped to drive demand.
Gone are the days where a larger home in a rural commuter hub is the desired choice of buyers, with the convenience and social offering of a city centre property now back in vogue. We’ve also seen the likes of HSBC opt to turn its back on Canary Wharf in favour of the Square Mile in recent weeks, adding to the growing momentum that is building across the market.
The City of London has one other defining reason as to why it’s remained largely impervious to the impact of the UK’s rocky economic landscape and that’s its appeal to foreign buyers.
Recent research from Benham and Reeves shows that there are some 103,425 homes owned across London by individuals with an overseas corresponding address or by an overseas company. This accounts for around 3% of London’s entire housing stock.
Just 1,995 of these foreign owned homes are located within the City of London, equating to 2% of all London’s foreign owned homes. However, with around 8,000 homes in total, the Square Mile is home to the lowest total level of housing stock of all areas of London. As a result, foreign owned homes within the City of London account for 26% of all properties.
Foreign buyers have been returning to the capital since pandemic travel restrictions were lifted and the same research from Benham and Reeves shows that there has been a 4% increase in the number of foreign owned London homes in the last year alone, with the City of London seeing a 2.2% increase.
Hong Kongers remain the most prominent nationality, driven by demand for the BNO visa and not only are many foreign buyers benefitting from a weaker pound in the current market, but they are also unphased by the current mortgage market chaos being seen at present.
For example, while the domestic base rate has climbed to 5%, interest rates in Hong Kong are unchanged at 5.5%. So not only are many foreign buyers benefitting from their budget stretching further, but the cost of borrowing in order to buy within the UK remains favourable from their point of view.
As a result, foreign buyer sentiment remains high and this is providing the London market, and the City of London, with a well needed shot in the arm at a time when the rest of the UK market is looking a tad rough around the edges. The result? The Square Mile property market is currently in very fine form indeed.
James Lockett is Director of property PR experts, ProperPR