London property market – international interest returns

Market activity rebounds after three-year slide

London property market – international interest returns

International buyers are slowly returning to the London property market after three consecutive years of declining market activity, research by debt advisory specialist Henry Dannell has revealed.

In 2017, international buyers showed phenomenal interest in London property, accounting for 31,693 property purchases. Not only was this the highest total in the last decade, but it also marked a 21% annual increase in market activity.

At £15.2 billion, the market value of these property purchases was also the highest seen in a single year in the last decade and was 24.3% higher than the previous year.

However, a combination of different events such as Brexit, changes to stamp duty, and the COVID-19 pandemic has caused foreign interest in the capital’s property market to slowly decline.

In 2018, foreign buyer transaction levels fell by 0.7%, before plummeting by 26% in 2019, as new SDLT rules for overseas buyers were announced and the finalisation of the Brexit process approached.

Then, in 2020, the share dropped again, this time by -3.6% as the global pandemic put a halt to international travel, preventing many buyers from entering the market.

As a result, Henry Dannell estimates foreign buyer transactions within the London market totalled just 22,444, with the market value of these purchases sitting just below £10.9 billion.

In 2021, however, international interest started to return to the capital, with transactions climbing, albeit marginally, by 0.6%. At the same time, the market value of these purchases has also increased, up 4.8% to just shy of £11.4 billion.

“Having peaked in 2017, a myriad of factors has led to a decline in international buyer interest within the London property market. As a result, both the proportion of transactions and the total market value of homes purchased by foreign buyers has been on the slide,” Geoff Garrett, director of Henry Dannell, remarked.

“However, this tide certainly seems to be turning and the initial green shoots of a recovery across this segment of the market appear to have sprung in 2021. This has undoubtedly been driven by the easing of pandemic travel restrictions and the fact that the political dust has now settled following Brexit,” he continued.

Garrett said this recovery is expected to continue over the coming year.

“With many foreign buyers already securing financial support within their native countries, often at much higher rates of interest compared to the UK, we don’t foresee increasing interest rates to act as a deterrent to the same degree as it will across the domestic market,” he pointed out.