London flats bounce back as international buyers invest

Created: 16 Jun 2022

As a modest softening in the residential property market develops in the UK, demand for London flats has bucked this overarching market trend with metrics such as time to sell falling significantly. International home buyers and property investors are active in the London residential real estate market, with Chinese keen to secure quality apartment living for students and families. 


The rate of price growth of UK residential property is easing given macroeconomic conditions in the market, including rising mortgage rates. Evidence for this is observable in data from Zoopla wherein reduced asking prices of more than 5 per cent are increasing, up from 4.7 per cent of listings in April to 5.1 per cent of listing in May. 


Much of this credit consumer base is insulated from such mortgage rate increases however, with 49 per cent of home buyers having locked in low fixed rates for five years or more in 2021, according to UK Finance. Those who locked these rates in for up to five years are also insulated in the short to medium term, however will become increasingly affected by mortgage regulation requiring stress testing for affordability. 


As inflation curbs spending power, as well as the mortgage affordability cushion, this is acting to impair lender capacity to furnish the mortgage market with greater capital. The regulatory stipulation that no more than 15 per cent of lending books may exceed a loan-to-income (LTI) ratio of 4.5 is also a factor set to decelerate house price growth across the country.


Wealthy buyers and international investors are less affected by such localised market forces. A focal point for such capital is prime and super prime property in London where Bloomberg reports indicate 24.4 per cent more properties were owned by Chinese residents between January 2020 and August 2021. Given the rise in value of the renminbi, up by over a fifth relative to the pound, this trend seems set to drive growth in the UK capital’s residential real estate market. 


High levels of buyer demand mean that the market is still moving quickly, but the time to sell – the time taken between listing a property and agreeing a sale – is starting to rise across most property types in most locations. (The exception is flats in London, a market which is seeing its own ‘mini-bounce back’ after a drop in demand during the pandemic).