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Even A House Price Boom Hasn’t Helped The Fanciest London Homes

Eaton Square — popular with Russians.

The average UK house price rose by 8.5% last year, as Britons spent more time and money on making sure they love where they live during the coronavirus pandemic. But that rising tide could not lift the cream of London’s housing market out of its long-term stagnation.

The number of transactions in prime central London in 2020 was the lowest on record, according to Land Registry data analysed by advisory firm London Central Portfolio. Last year, 2,936 transactions took place in the boroughs of Westminster and Kensington and Chelsea, 42% below the long-term average, and about 20% below 2019. 

This dearth of transactions didn’t cause prices to plummet, but they did drop in those neighbourhoods while the country on average saw that big 8.5% rise, a figure also taken using Land Registry data.

Prime central London values fell by 4.4% in the first couple of months of the pandemic and have been pretty much flat since May, Knight Frank data showed. 

Knight Frank said that the various bans on international travel to and from the UK during the past year, which contributed to passenger numbers coming through Heathrow falling more than 80%, were a major factor in reducing the number of prime central London sales because foreign buyers make up a large proportion of buyers there. London Central Portfolio’s rallying cry was that this represented a “short-term window of opportunity” for domestic buyers. 

Homes in this area have been experiencing price depreciation for several years, having fallen by more than 20% since 2014, according to data from Savills. Changes to the taxation of these homes and worries over the impact of Brexit hit the market before the pandemic scuppered any chance of a post-Brexit recovery.

It perhaps stands to reason that the market for London’s poshest homes has not recovered while the rest of the UK has because that market had long decoupled from the economic reality that governs the rest of the country. 

“In the 1990s, there was a link between prime central London and the rest of the market,” UCL Bartlett Real Estate Chair Yolande Barnes told Bisnow in January. “Where that market went, the rest of the market would eventually follow. But from about 2008, after the financial crisis, it became almost fully separated from the rest of the market, and … it became something for billionaires, not mere millionaires, and that is what set it apart.”

It was a market to itself on the way up, and on the way down too.