Picture the scene: you’re sat on a Wednesday night watching Location, Location, Location on the sofa. Kirsty and Phil are helping people move house in the London area and your jaw begins to drop when you discover just how little space the prospective buyers are getting for their money.
That’s just the way it is. The property market of the English capital stands apart from the rest of Britain. However, there are several unique demand drivers which we’re going to explore, aside from the fact London is a global commercial hub and remains a city of immense historic interest and appeal.
Below, we’ll explain in more detail why London’s property market works differently to other regions of the UK.
Huge limitations on space for development
One of the biggest issues for historic London is its minimal available land. Expansion for property development is tricky given greenbelt restrictions in surrounding suburbs. Subsequently, it’s no surprise why demand far outstrips supply when developers are unable to get the go-ahead to build new homes.
Furthermore, what limited land is offered to developers is riper for high-density projects and apartment blocks rather than family homes.
Consistent demand from overseas cash buyers
London still holds sway as a global investment opportunity. There are cash buyers from overseas who still view the city as a stable investment. Cash buyers will tend to originate from the Middle East and Asia, as well as western Europe. They look to London’s property market as one of the most durable for any economic period, be it boom or bust. International buyer demand alone will drive up property values, simply because the locals have intense competition for each unit.
Cash buyers aren’t just a frustration for property markets though, as they can offer a way out of owning a property asset too. There’s been a wave of ‘sell my house fast’ service providers online, all of whom commit to buying any UK property in cash, within a matter of days. This is a considerable boon for those who are struggling to sell a property on the market or are happy to realise its cash value quickly, having inherited it.
Diverse buyer profiles
The buyer diversity in London’s property market is another reason why it can sustain such a dynamic market. At the lower end of the spectrum, young, well-paid professionals are happiest seeking property closest to business districts where the work is. Meanwhile, high-net-worth investors will be more interested in prime London postcodes, helping to support the demand at the higher end of the market.
Wages drive property values
According to Statista, the median annual wage in the UK in 2023 was £34,963. However, London weighting is still alive and kicking. The average annual wage in London in 2023 was £44,370, almost ten thousand pounds greater than the national average. All of which explains why property values continue to rise higher in the capital, since workers have more buying power and can still afford mortgages at the same earnings-to-loan multiples.
All of which explains why London’s property prices can be three or more times greater than the national average. Areas like Chelsea, Kensington and Westminster consistently rank among the most expensive regions to live in the UK.