The London housing market in May 2024 displays a complex landscape influenced by fluctuating prices, stabilizing rents, and diverse supply-demand dynamics. This thorough report provides insights into key trends across various segments of the market, including rent, house prices, and construction activities.
Summary
- The rate of growth in average asking rents for new tenancies in London has stabilized over the past two quarters, but affordability remains a pressing issue.
- Available rooms for rent continue to diverge from the high demand for shared living spaces.
- The average price of homes sold in London has dipped to the lowest since 2021, although asking prices have seen marginal increases recently.
- Buyer activity in the market has increased as new buyer enquiries rise against instructions to sell.
- Prices of construction materials have been gradually falling since their peak in mid-2022 but remain stable.
- Housebuilding activities in London have seen a steady decline since 2022, with completions running at historical lows.
London Rent Prices
Rental Market Demand and Supply
- According to the new ONS Price Index of Private Rents, covering both new and existing tenancies, the average monthly private rent in London rose to £2,070 in April 2024, marking a 10.7% increase over the past year. This is the second-highest growth rate since the data's inception in 2015.
- Rightmove reports that average asking rents for new tenancies in London reached £2,633 a month in Q1 2024, with annual rent growth slowing to 5.3%—the lowest rate since 2021. In comparison, the rest of Britain saw an 8.5% growth during this period.
- HomeLet figures indicate an 8.2% annual growth in rents for new tenancies in London up to April, with tenants spending an average of 39.1% of their income on rent.
| Source | Metric | Value |
|---|---|---|
| ONS | Average Monthly Rent | £2,070 |
| Rightmove | Average Asking Rent | £2,633 |
| HomeLet | Income Spent on Rent (%) | 39.1% |
This detailed overview of rent shows a pressing issue of affordability, with rents rising faster than the earnings.
Rental Market Demand and Supply
- Figures from SpareRoom.com show that the number of advertised available rooms in London flatshares increased rapidly over the last quarter, reaching the highest levels since August 2021. The number of advertisements posted by people searching for rooms fell by 27% compared to last year.
- In mid-May 2024, there were 1.58 rooms available per searcher.
- Data from Zoopla indicates a year-on-year rise of 22% in one-bedroom homes available for rent in London under £1,500, with similar increases for other housing categories.
These data points highlight a divergence where the supply of rental rooms and flats surges while demand shows signs of waning.
London House Prices
Regional Level Average House Prices
- The ONS House Price Index indicates the average house price from completed sales in London fell by 0.9% in March 2024 to £499,000, representing the lowest price level since mid-2021. This marks the third consecutive month of decline.
- Rightmove's recent data shows marginal recovery, with the average asking price in London increasing by 0.1% year-on-year to £697,000.
Borough Level Average House Prices
- Growth in asking prices was highest in Hammersmith and Fulham and Camden at 6.5%, followed by Merton at 6.3%.
- Conversely, boroughs like Hackney saw the steepest declines at 3.3%, followed by Wandsworth at 1.6% and Barking and Dagenham at 1.1%.
| Borough | Annual Growth (%) |
|---|---|
| Hammersmith and Fulham | 6.5% |
| Camden | 6.5% |
| Merton | 6.3% |
| Hackney | -3.3% |
| Wandsworth | -1.6% |
| Barking and Dagenham | -1.1% |
These variations reflect differing market conditions across London's boroughs, with some experiencing growth while others face decline.
London Home Purchasing Demand
Reported Changes in Demand and Supply
- The RICS monthly housing market survey reveals increased market activity, with a balance of new buyer enquiries compared to instructions to sell.
- The Bank of England reports an average interest rate of 5% for a 2-year fixed-rate mortgage at a 75% loan-to-value ratio in April, impacting buyer affordability.
Construction Material Prices
- BEIS Monthly Statistics show a 0.7% increase in the price index of materials used in new housing between February and March 2024. Despite earlier rapid increases in 2021 and 2022, material prices have now stabilized.
Housing Supply in London
New Housebuilding
- Data from Molior reveals a sharp decline in housebuilding activity since 2022, with starts, completions, and sales all falling significantly.
- DLUHC data indicates housing completions in 2024 are on par with 2023 but at the slowest rates seen in the 2020s.
| Activity | Change (%) |
|---|---|
| Starts | -32% |
| Completions | -24% |
| Sales | -32% |
Overall, while housing completions have shown slight improvement compared to 2023, they remain at some of the slowest rates in recent history.
Will the London Housing Market Crash 2024?
The question of whether the London housing market is on the brink of a crash involves a careful consideration of various indicators, including demand trends, pricing dynamics, and market forces. While definitive predictions are challenging, analyzing current trends and potential catalysts can provide insight into the market's direction.
Market Outlook
While the London housing market has exhibited resilience in the face of various challenges, including the pandemic and economic uncertainties, predicting its future direction with certainty remains elusive. However, based on current trends and indicators, several possibilities can be considered:
1. Stable Growth: If economic conditions remain favorable, with steady employment, moderate inflation, and supportive government policies, the London housing market may continue to experience stable growth. This scenario would likely involve modest increases in prices and transaction volumes, with demand and supply dynamics remaining relatively balanced.
2. Correction: In the event of economic downturns, rising interest rates, or significant policy changes, the market could experience a correction. This scenario would involve a slowdown in price growth or even modest declines as demand weakens and supply outpaces demand.
3. Resilience: Despite potential headwinds, the London housing market has demonstrated resilience in the past. Continued demand from domestic and international buyers, coupled with ongoing housing shortages, could support prices and activity levels, albeit at a slower pace compared to previous years.
4. Uncertainty: Global events, such as geopolitical tensions or unforeseen economic shocks, introduce an element of uncertainty into the market outlook. While these events may lead to short-term volatility, the long-term fundamentals of the London housing market, including its status as a global financial hub and cultural capital, may mitigate adverse effects over time.
Factors Influencing the Market
1. Economic Conditions: The performance of the broader economy, including factors such as employment levels, wage growth, and inflation, will significantly impact the housing market. Economic stability and growth can stimulate demand for housing, while economic downturns may lead to decreased demand and downward pressure on prices.
2. Government Policies: Housing policies and regulations implemented by the government can have a profound effect on the market. Initiatives aimed at increasing affordability, stimulating construction, or regulating rental markets can shape supply and demand dynamics.
3. Interest Rates: Mortgage interest rates play a crucial role in housing affordability. Lower interest rates typically stimulate demand by making borrowing more accessible, while higher rates can dampen demand. The decisions of central banks, such as the Bank of England, regarding monetary policy will influence mortgage rates.
4. Supply and Demand Dynamics: The balance between housing supply and demand is fundamental to market stability. Changes in population growth, migration patterns, and household formation rates can impact demand, while factors such as construction activity and housing affordability affect supply.
5. Global Events: Global economic trends, geopolitical tensions, and environmental factors can have indirect effects on the housing market. Events such as trade disputes, natural disasters, or pandemics can influence investor sentiment, consumer confidence, and market stability.
Thus, the outlook for the London housing market in 2024 is subject to various factors and uncertainties. While growth prospects remain plausible under favorable conditions, the market's resilience and ability to adapt to changing circumstances will ultimately determine its trajectory.
Sources:
- https://data.london.gov.uk/housing/housing-market-report/
