The Prime Central London (PCL) property market has endured five years of difficulty and uncertainty. The market has experienced an array of tax changes, including changes in stamp duty and capital gains tax, making the market less desirable for foreign investors. Furthermore, Brexit introduced a climate of uncertainty, which aggravated the market. All of these factors have culminated in capital values, having decreased by 20.9% as reported by Savills, since 2014.
The election of Boris Johnson, in the late part of 2019, carried with it new hope for the PCL property market. The market reacted favourably, as we experienced the so-called 'Boris Bounce' , where we saw a surge of activity in the market.
As the dark clouds of Brexit looked to be clearing on the PCL property market, a new and much bigger obstacle, was delivered. It was Covid-19. This created a lot of complications including lockdowns, where the housing market was completely closed down. Restrictions in travel, which hampered access to the PCL market, from foreign investors.
Despite all this, the PCL property market showed just how resilient an asset class it can be, by only dropping by 0.5%, in the whole of 2020.
With all of this in mind, 2021 is set to be a more promising year for the PCL property market. The fundamentals of the PCL property market are strong. Interest rates are at an all-time low, meaning that borrowing can be accessed for very cheap rates. The pound is also trading at relatively low rates against other major currencies, meaning that the PCL property market is cheaper for foreign investors. Capital values are also much cheaper, making London very attractive to invest in, compared to other major cities in the world.
Please refer to the tables below which show the London capital values in 2014 and 2020 in comparison to other major cities. We can see that London was much more expensive, relative to other cities in 2014, priced at $5,631 per square foot. Whereas in 2020, it is priced at $3,310 per square foot (Savills).
With all of this in mind, 2021 is set to be a more promising year for the PCL property market. The fundamentals of the PCL property market are strong. Interest rates are at an all-time low, meaning that borrowing can be accessed for very cheap rates.
The pound is also trading at relatively low rates against other major currencies meaning that the PCL property market is cheaper for foreign investors.
Capital values are also much cheaper, making London very attractive to invest in, compared to other major cities in the world.
Please refer to the tables below, which show the London capital values in 2014 and 2020, in comparison to other major cities. We can see that London was much more expensive, relative to other cities in 2014, priced at $5,631 per square foot. Whereas in 2020, it is priced at $3,310 per square foot (Savills).
This is why we now see comments such as the one below:
“This feels very different to previous crises. Interest rates are at all-time lows, regulatory changes related to affordability have put the banking system on a much sounder footing, and the weak pound continues to make UK property even more attractive to international investors.”
-Katherine O'Shea, Director, Coutts Real Estate Investment Service
Furthermore, the horizon for the PCL property market looks clearer, as 2020 ended with a final agreement on the Brexit deal. The roll-out of the vaccines, also means that there looks to be light at the end of the tunnel of Covid-19 crisis. As travel restrictions begin to be lifted and London becomes more accessible, we predict there will be a surge of events and travels to London bringing back the buzz in the city, causing prices in the PCL property market to increase. Savills are predicting a 4% rise in the PCL property market in 2021.
Andy Shepherd, Dexters CEO - The head of the capital's largest independent estate agency, predicted prices in PCL could rise by 2-3% this year. He further remarks that:
“During 2021 the Covid-19 vaccine will bring a return to normality and a restart of mass international travel, resulting in a wave of buyers, tenants and investors returning to the London market.”
Moreover, it seems that commentators are extremely optimistic about the future, as Savills predicts a 17.5% increase in the PCL property market in the next 5 years.
At The Collaborative London, we partner with investors to find them diamond opportunities, to develop PCL property. The fundamentals of the market are strong and it’s a great time to be investing. The current window of opportunity to invest in the market is becoming smaller. The time to act is now! Especially as the government's stamp duty holiday comes to an end on the 31st March 2021 and foreign buyers will be charged an extra 2% on stamp duty rates which will be introduced on the 1st April 2021.
If you are interested in partnering in a PCL property deal, contact us and let's Collaborate!