London review

London is a global capital

Robin Johnson

MD, Kinleigh Folkard & Hayward

If the preoccupation with levelling up tells you anything about our country, it is that our capital and its environs remain distinct from other parts of this isle – even if you think this is not true but rather something that exists only in the imaginations of the UK’s citizens. It’s my experience that there is a kernel of truth in this assertion, and there is plenty of evidence to support it. London’s call upon our graduate base, its geographic location as a transport hub for transatlantic flights, and the sheer volume of business and wealth it generates are unparalleled. What our departure from the European Union has proven is that our focus on the UK rather than the rest of the world is a political consideration rather than an economic one. While we reflect on our way forward, the world continues to turn, and London is getting back rapidly to something we might have recognised pre-pandemic. It is not the same, but it displays many similar tendencies as before – in all walks of capital life. Though the latest Office for National Statistics figures show that London continues to be the region with the UK’s lowest annual growth, at 8.2 per cent, let’s not misunderstand the data. Despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK, with an average price of £526,000 in May 2022, and in recent months the suburbs have once again crept to the top of the price-growth charts as hybrid working has meant a sudden dash back from the countryside to something that better accommodates those less-frequent commutes to the office. To put this in context, the latest Halifax house price index showed the UK housing market defied any expectations of a slowdown, with average property prices up 1.8 per cent in June, the biggest monthly rise since early 2007. House prices have now risen every month over the past year and are up by 6.8 per cent, or £18,849 in cash terms, so far in 2022, pushing the typical UK house price to another record high of £294,845. Like Halifax, we also put this down to the acute imbalance between supply and demand, the latter remaining persistently strong, if very slightly less so in more recent months. Demand for all property in London is becoming acute again. Higher energy bills, weekly shops, and fuel costs of course are putting pressure on household finances, but so far haven’t really had a meaningful impact on demand from buyers. Mortgage rates are higher than they were, but by any account they’re still incredibly low. Take inflation into account, and banks are paying us to borrow. There will be households facing payment shocks as very low fixed rates expire and remortgage deal rates will mean a hefty rise in monthly payments, it’s true. But there will also be as many households as possible still intent on securing homes with outside space and greater square footage to accommodate more – if not permanent – home working. There are also some tailwinds for the housing market we shouldn’t discount. Developers are feeling positive, and from the start of August the Financial Policy Committee’s pledge to scrap mortgage affordability tests, returning to loan-to-income limits, has helped more perfectly solvent borrowers to buy. Anyone who has been to the capital in recent months will attest that the city’s recovery has been swift. Tourists crowd the pavements, queues outside the galleries, museums, and theatres are back to their usual interminable lengths, and buzzing restaurants and cafés are spilling out onto the streets. City workers are back in the office. Shirts, ties, and after-work drinks are back with gusto as social confidence returns and cooped-up Londoners get back to business as usual. Foreign investors in London’s property market, whose interest had cooled during the worst of the pandemic, are also now eager to lock into capital returns that currently offer one of the most attractive inflation hedges out there. As if to underline the point, the mayor of London and chair of C40 Cities Sadiq Khan is convening global cities to accelerate city-led action to address the triple threat of congestion, air pollution, and the climate emergency. The C40 is a network of mayors of nearly 100 world-leading cities representing 582+ million people and one-fifth of the global economy. They are meeting to address and deliver action to confront the climate crisis. Whether you believe this is a good cause or not, it underlines my point. London is a global city, and, perhaps, once established as such, it is true that old habits die hard. It has more in common with other major global cities than it does with many other parts of the UK. This is not bad – it just makes it different, and, I believe, more resilient. M I