Back to London: Domestic and international shoppers return to UK capital as pandemic subsides

Two years ago, when the pandemic first swept the globe, many city dwellers ran for the exits. From New York to Paris, and across the UK, people living in densely populated urban areas, who were suddenly forced to work from home, have moved to the suburbs or the countryside.

But lately, London real estate agents began to notice a change.

Robin Chatwin, residential area manager in South West London at Savills, recently struck deals with two families who left the capital for the countryside during the pandemic and have now returned – coincidentally to the same borough of Wandsworth, in the South London. In both cases, he said, clients were working in “city” jobs – such as in banking or law – and were being asked to return to work more regularly.

“At the start of Covid there were a lot of people leaving London, not two ways,” he said. “Now as things are getting back to normal we have certainly seen over the past few months or so people who have moved have come back and bought back in London because they are now back in the office at least four, if not five , days a week and they discovered that the commute was not what they wanted to do.

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While Mr Chatwin has looked after UK-based shoppers, his colleagues have worked with international clients who, after months of travel restrictions, are also looking to return to London.

“We have very, very strong demand not only from international buyers coming from overseas, but also from international buyers already based in London,” said Alex Christian, London director of Savills Private Office.

In March, the average asking price for a house in the UK hit a record high of £354,564 (US$463,526), ​​according to a report by Rightmove. In London, asking prices rose 6.3% a year to £664,400.

After years of depressed prices and despite potential headwinds such as rising inflation and interest rates, the London market is heating up with renewed interest from overseas and domestic buyers.

Domestic demand

Mr Chatwin said the renewed interest he has seen in the capital is mainly linked to the return of workers to offices.

“As offices get busier, if you’re not there when everyone else is there, you’ll find it harder to progress in a company,” he said.

He said offices in south-west London – from Richmond to Barnes, from Wimbledon to Putney – had customers wanting to return over the past few months.

“Not hundreds, but definitely more people looking,” he said, noting that pioneers have benefited the most from market momentum. “If they moved early enough and the market moved with them… they could afford to get back into the London market,” he said.

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Mr Chatwin is not the only agent to have seen a rebound in domestic buyers seeking the London market.

“We are definitely seeing buyers who have sort of escaped the countryside starting to make sure they have somewhere in London,” said Stuart Bailey, Knight Frank’s head of premium sales in London. “They’ve been out of London for two or more years [but are] realize that working from home won’t last forever.

“Not One or the Other”

That said, the “country flight” narrative doesn’t paint the whole picture. Mr Bailey said many of his clients who have moved from London are ‘now considering setting up shop in London, not one or the other, but a foot in both’.

This has meant a resurgence of interest in pied-à-terre in central London areas, including flats with no outdoor space. (Mr Bailey noted that these types of apartments are “normally where you would have competition from international buyers”, so UK-based buyers would do well to transact before overseas buyers return.)

According to Toby Dixon, director of sales at DS Churchill, a subsidiary of Christie’s International Real Estate, the increased interest in country property over the past two years has not come at the expense of central London.

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“There were fewer people moving entirely – to live full time – and more people asking for weekend places,” he said.

Prime customers, in particular, are unlikely to have sold assets in London in order to move to the countryside and more likely to have downsized in London and purchased a second home further afield.

“In the typical core central London market, particularly in the higher end, the £15-20m market, it’s not one or the other,” said partner Chris Richmond. of the private real estate investor CIT Group. “It’s not people selling in London to move to the countryside, it’s people making multiple purchases to better suit their needs.”

Other Londoners, meanwhile, have simply expanded London or moved slightly further from the city center in order to access more space and greenery.

“Bigger houses, houses with communal gardens, family houses – there is a lot of demand for that,” said Mr Dixon, adding that he had recently put a Notting Hill house up for sale which had been traded in two weeks and was done asking without going to the open market. .

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While this is happening – and has been throughout the pandemic – in central areas like Notting Hill, South Kensington and Chelsea, Mr Chatwin has also seen families move to south-west London to expand.

He said he’s had clients who may have been living in a basement apartment in Pimlico and planning to move to a more residential suburb in four or five years, but accelerated their plans during the pandemic.

This trend has continued even as the worst of the pandemic fades.

“A lot of people are now increasing their workforce locally rather than leaving London, and staying in the capital, because again I think they perceive they will be going to the office four or five days a week rather than one or two everyone was [expecting]said Chatwin.

The return of foreign buyers to central London may also inspire domestic owners to sell properties in this part of town now and move further to the suburbs.

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Foreign buyers

Louis Harding, head of London at Strutt & Parker, said he “certainly” saw overseas buyers returning to London “in greater numbers”.

“Over the last six months or so we have seen properties that are not primary residences suddenly become very popular again, in areas like Belgravia and Knightsbridge in particular,” he said.

He said the big prime and super prime lock and leave developments are suddenly very attractive.

Although interest is increasing, foreign buyers are not expected to return in force before the end of the year, probably between May and July. Agents expect to see buyers from the Middle East, South Asia, America and Europe return to the market as travel restrictions in those regions, as well as the UK, soften. However, East Asian buyers are unlikely to return in the same numbers due to ongoing restrictions on their return journey.

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“We had a two-month period between mid-September and mid-November when we had what looked like a very normal market in London for the first time in a long time,” Mr Christian de Savills said. “The problem we had was when this variant of Omicron became the news in mid-November…everybody living overseas was up and gone within days.”

He noted that it’s normally never a busy time of year for London, given that “people are usually on the beach in the Bahamas or on the slopes”, but said he had high hopes for spring.

Mr Christian said while ‘we all thought the apartment market would be completely and utterly dead as a result of what happened during the pandemic’ it is ‘a measure of the pull of London’ that it was not the case.

“Where is the sector of the market that really fought back last year? It was new build apartments,” he said, pointing to developments such as Chelsea Barracks or 1 Grosvenor Square in Mayfair, which he says has sold 50% of his 44 apartments since October last year.

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Mr Richmond said CIT is currently selling two new build projects, Regents Crescent and Lancer Square.

“Lancer Square has several of those large apartments that you would typically expect to sell towards the end of the process, after the project is complete,” he said. “And the interest we’ve seen is around these larger units.”

What this means for prices

Despite the increase in demand, inventory levels are down significantly this year, which should have an impact on prices.

“I think prices will continue to rise slightly as they have over the past year,” Dixon said. “There is definitely not enough supply and there is just more and more demand.”

Mr Bailey pointed out that prices in London were low long before the pandemic.

“We’ve definitely come out of sort of a five-year downward price trend and have crossed the bottom of that period,” he said. “Prices are starting to pick up, but the market is not running away on its own…a 10/10 property gets a 10/10 price, but the market is not yet strong enough for a 7/10 property to get a 10/10 price.”

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Strutt & Parker predicts prime house prices in central London will rise by up to 10% in 2022 amid strong demand and “persistent supply constraints”. He estimates that price growth in the UK will reach between 20% and 30% over the next five years, with an estimate of 20% to 35% for central London.

Mr Harding said demand was up around 100% year-on-year, but stocks were down around 25-30%.

The supply pipeline for large apartments, in particular, “is getting very thin over the next 12 to 36 months”, Mr Richmond said, adding that it has been difficult to get approvals for projects with units over 200 square meters or approximately 2,150 square meters. feet.

Knight Frank’s Mr. Bailey pointed to another reason why the stock will stay low. While domestic buyers, who have been active in London for the past two years, tend to sell their current homes to buy new ones, international buyers will not do the same when they return to the market.

“International buyers come here and buy, so you don’t get the supply,” he said. This “will eat inventory and not replenish inventory, putting upward pressure on prices.”

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