Prime London property prices tumble during the pandemic

Property prices in some of London’s most exclusive areas have dropped significantly since the outbreak of coronavirus, claims one specialist property agency. Recent research from Astons analysed property prices in high-end areas like Mayfair, Knightsbridge and Belgravia, comparing average sale prices from 2019 against those of 2020. 

How have prices in luxury London changed?

In general, while prices in London as a whole saw modest gains of 3%, those in the most expensive postcodes dropped by an average of 10%. However, this masks a great see-saw in variation between different areas.

The biggest loser in 2020 was the W1J postcode (covering Mayfair and St James’s), which saw a 40% drop in property values compared to 2019. Other losers included Kensington and Holland Park (down 18%), Knightsbridge and Belgravia (down 17%) and the W1S postcode (another one that covers Mayfair and St James’s), which was down 15%. 

However, some upmarket areas appear to have bucked the trend. Among them, the SW3 postcode (covering Chelsea and Knightsbridge) saw gains of 23%, while in the SW1Y postcode (St James’s) prices were up 54% on the previous year. This is particularly odd because it means the best and worst performing of the high-end postcodes were directly next to one another.

Why might this have happened?

There are a few reasons why these more expensive areas might have gone against the general national trend towards increasing property prices during 2020. 

To start with, there’s the stamp duty holiday that was introduced by the chancellor in July 2020. This has presented some big potential savings for buyers further down the market and has fuelled a sort of ‘mini-boom’ in property sales nationwide. However, it only applies to the first £500,000 of the sale price, which makes it rather less significant in areas such as the W1J postcode – where the average pre-pandemic sale price of a property was nearly £5 million.

There’s also been the question of travel restrictions and a generally unstable world economy. Swathes of London’s most expensive properties aren’t owned by people living and working in the city, but by super-rich overseas investors – and this is particularly true of the areas analysed during this research. The various travel restrictions imposed by different nations may have affected some of these buyers, while others may have simply decided to hold fire on big investments until things settle down a bit.

What’s the outlook for London property?

Of course the flipside of this is that the drop in prices could make some of these areas more appealing to those with serious money to spend. A £5 million property knocked down to £3 million represents a saving that is vastly bigger than any stamp duty holiday, and presumably this is why a prominent estate agency has undertaken and publicised this research in the first place.

In truth, while significant to a small number of exceptionally wealthy individuals and organisations, the property values in these high-end postcodes are fairly detached from the rest of the London property market. The prices are so high that even very affluent Londoners looking for a property to actually live in will often tend to search in other areas where they can get a lot more for their money.     

All the same, property prices in London generally have not increased at the same rate as they have elsewhere in the country, and there are a few possible reasons for this – chiefly that they were much higher to begin with. The coronavirus pandemic has seen the vast majority of office staff working from home and pretty much the entire service industry furloughed, leading many to wonder why they would pay such a high premium to live in the capital. The big question is what will happen in the future. If home working becomes the norm then it could damp down London property prices in the longer-term, but if firms start moving back towards office working and London’s world-famous cultural, dining and nightlife scenes are allowed to open up again, people might start to see the benefits of city living once more.