Property Market Forecast for London 2023

Research for July 2023, published by the UK House Price Index, shows that the average house price in London is £534,265. This is down -0.8% since July 2022 but up slightly on the previous month, growing 1.1%. The UK property market this year has been characterised by sluggishness, and London, in particular, has experienced a sharp deceleration in price growth.

Data collected by Rightmove on properties sold through their website show even higher averages.

According to their data, the overall average price for properties sold in London over the past year is an eye-watering £764,877, and this is also broken down by property type.

Source: Rightmove, October 2023

Looking at these figures, it’s easy to see why the London property market has become prohibitively expensive for many new investors.

With the current state of London’s property market, many are wondering if and when the city will see a return to healthy growth.

One factor contributing to the deceleration is the very obvious gap in house prices, rent, and cost of living in London compared to other popular major cities such as Manchester and Liverpool. This has caused people to turn away from the London market in search of better deals elsewhere. Apartments for sale in Liverpool and Manchester are particularly popular, with projected growth in the near future being much higher in the North West compared to London.

However, property experts have characterised London’s period of stagnation as the market correcting itself rather than a slump. It’s possible that this halt in growth could encourage buyers to return to London while the costs are comparatively lower.

Let’s look in more detail at the forecast for house price growth and rental growth in the capital city.

Despite reports of renters leaving the capital searching for a lower-cost lifestyle, rental demand remains high in London, and it continues to far outstrip supply. With the densely packed job opportunities and educational institutions that can’t be found elsewhere, there will always be a healthy pool of potential tenants in London despite the financial premium.

In Greater London, private landlords provide accommodation for around 30% of households. This is higher than the rest of the country, where overall, they account for about one-fifth of households.

Knowing this, we can expect rapid rental growth to continue in the capital. City Hall predicts that the average monthly cost of renting will rise to £2700 next year.

Property prices and rental yields can vary quite significantly across London. When looking for the best area of the city for your property investment, it is worth looking at which districts are considered buy-to-let hotspots currently and which areas are on the up.

As it stands now, the areas with the highest gross rental yields in London, according to Zoopla, are Barking and Dagenham with 5.81%, Newham with 5.56%, and Bexley with 5.38%.

In terms of future forecasts, there are many regeneration projects across the city promising to bring a boost to certain areas. Meridian Water is one area that looks set for significant growth thanks to a £6 billion, 20-year regeneration plan. A new Meridian Water train station opened in June 2019, and if work continues on Crossrail 2, the station will be added to the line.

Barking and Dagenham is currently one of the cheapest places to buy property in London, and as mentioned before, it ranks highly in terms of average rental yields. Looking forward, there is a film studio under construction in the area, which will become London’s largest film studio. There are also various redevelopments across the borough set to create thousands of new homes and jobs. Property in this area could be one to watch regarding capital value growth.

Overall, regeneration is one of the most important factors for investors to consider, and the amount and quality on offer can vary depending on where you look. Consider our detailed look at North West regeneration plans for the latest statistics.