House prices most sluggish in prime central London and north-east England when Covid-19 struck
House price growth over the last five years will be one part of assessing how the property market emerges from the pandemic
2 minutes to read
Prime central London and parts of north-east England were the worst-performing areas for house price growth in England and Wales over the last five years, potentially softening any impact on values from Covid-19.
In the five years to February 2020, prices in Kensington & Chelsea fell 2.5%, while in neighbouring Westminster, the decline was 0.4%. These were the only two local authorities to record a decline over the period, an analysis of data that excludes the City of London shows.
The five worst-performing areas were completed by Carlisle (+0.5%), Hammersmith & Fulham (+0.8%) and Redcar and Cleveland (+2.4%).
The declines in prime central London, which had been bottoming out, were caused by a succession of tax changes that disproportionately affected higher-value properties. Steeper falls recorded by the Knight Frank prime central London index reflect a focus on higher-value properties versus the whole-market local authority data analysed by the Land Registry.
Meanwhile, in some areas of north-east England, prices have yet to recover to their 2007 peak due to regional economic weakness.
The top-performing local authorities over the five-year period were Corby (41%), Wellingborough (39%), Newport (39%), Luton (38%) and Basildon (38%).
Knight Frank expects 526,000 fewer transactions across England and Wales this year as a result of the Covid-19 pandemic. Prices are forecast to drop by 3% over the course of the year although ad hoc renegotiations of between 5% and 10% are taking place.
“The performance of house prices when Covid-19 struck is one part of the puzzle in trying to determine how property markets will emerge from this pandemic,” said Tom Bill, head of London residential research at Knight Frank. “When the recession struck in 2008, many markets had undergone a period of very strong growth. The other differences this time round include the government’s furlough scheme, a decade of ultra-low interest rates and the fact supply and demand have fallen at the same time.”
Average prices in England and Wales increased 70% in the five years before the last market peak in November 2007, as the chart below shows. In Kensington & Chelsea, the increase was 74% over the same period while in Carlisle a rise of 111% was recorded.
The average price in England and Wales had recovered to its peak by May 2014. In Kensington & Chelsea, the peak (February 2008) was reached again in May 2010, underlining how central London property quickly became a safe haven investment around the world in the wake of the global financial crisis.
