What cost of living crisis? Prime London property prices are expected to rise 6% next year, placing it third behind LA and Miami
- London prime property prices are recovering after the pandemic
- International buyers are also returning to the capital’s real estate market
- Edinburgh sees 8% price increase in 2022 compared to 4% in London
London’s prime properties are expected to see a 6% price increase next year – the third highest in the world – despite an increasingly erratic economic backdrop.
The British capital is just behind Miami and Los Angeles, where top prices are expected to rise 8 percent and 7 percent respectively, according to broker Knight Frank.
Madrid is in fourth place with a projected growth of 6 percent for 2023, followed by Seoul at 5 percent.
The price of London’s most expensive houses could rise by 6% next year, Knight Frank said
In his Global Prime Forecast, Knight Frank said the London market is being helped by strong demand from domestic buyers.
It is also supported by the revival of international buyers, a market that has suffered from the pandemic, thanks in part to the weaker pound.
However, the property expert warned that inflation risks will be more persistent in the UK and the Eurozone, making them one of the last to cut their mortgage rates.
Further into 2023 and 2024, it said, this could result in a weakening or reversal of the currency advantage currently enjoyed by those buying homes in the UK using US dollars.
Only Vancouver and Melbourne are expected to see a decline in prime real estate price growth next year, despite the uncertain global economic outlook.
Globally, the company expects more moderate price growth in 2023, averaging 2.8 percent in all 25 cities it controls (see chart above).
The price growth gap between the best and worst performing cities is expected to narrow from 27 percentage points in 2022 to 12 percentage points in 2023.
In most cities, a strong labor market, rising incomes, the increased equity in prime housing built up during the pandemic and – for those with mortgages – the high share of fixed interest rates will mitigate the impact of the slowdown.
Growth forecasts for 2022 revised downwards
Across the 25 cities tracked, Knight Frank now expects top prices to rise by an average of 4.4 percent by the end of 2022, compared to the 6.1 percent forecast six months ago.
Despite this reduction, projected growth for the year still exceeds nine in the past ten years.
London is one of those who have taken a hit. Knight Frank has lowered its 2022 forecast from about 7 percent in December 2021 to 4 percent from June this year. Edinburgh, on the other hand, has seen one of the largest upward revisions, with price growth expected for the year from 5 to 8 percent.
London is expected to see 4% overall property growth this year, down from Knight Frank’s earlier forecast of 7%, although business should pick up in 2023
Halifax’s recent house price index showed that, while London continues to record lower annual house price inflation than the other UK regions, July’s 7.9 percent growth was the highest in nearly five years.
With an average property now costing £551,777, the capital’s already record average house price continues to rise, rising £40,361 in the past year.
While the prime housing sector has a higher proportion of cash buyers and can therefore be considered less exposed to higher mortgage rates, tighter monetary policies and rising interest rates worldwide are inevitably impacting prime markets as well.
Despite this, Miami and Dubai are both expected to see a double 12 percent increase in their prime real estate prices in 2022 – although the figure still represents a slowdown compared to last year.
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