Why Average London house price exceeds £500,000 for the first time

The end of a turbulent 2020 brought with it another record – the “first time ever” surge in average London house prices to over GBP 500,000! Some areas showed a quicker growth in prices, South Kensington properties, Chelsea and Brent being some of them.  This can be evidenced by the professional Estate Agents in South Kensington as well as the Letting Agents in South Kensington.

Some of the reasons for this extraordinary price rise, despite the other effects of the pandemic, can be contributed to the following:

SDLT holiday:  The stamp duty holiday is responsible for a significant surge in property purchases, leading to a rise in property prices as well.  This well thought out decision caused many people, who may not have thought it possible to buy their own homes, to invest in properties.  In turn, it spiked the price of properties available for sale, including in city areas which are more expensive.

Foreign investment has been an essential part of the UK property market, especially in London. With the SDLT holiday being available to non-residents, this is another reason for the boom in house prices, with more foreign investors also taking advantage of the SDLT holiday.  With virtual viewings of properties, the decisions for buyers have been made easier.

Although an additional charge of 2% stamp duty to be payable by non-residents with effect from 1 April 2021, there are still optimistic predictions for foreign investors because of the GBP value remaining low.

Result of Lockdowns:

With the lockdowns, more people have not been attending offices and working from home.  This has led to a rise in demand for more spacious accommodation, with outdoor relaxation facilities, to provide for a comfortable home environment with office space as well.  It generally meant a move from cities to the suburbs or more rural areas.  However, it referred to London as well, as one expert estate agent mentioned, “Considering England was in national lockdown for most of November, and a growing number of people are looking to move away from big cities in favour of more space, the resilience of the capital’s property market is staggering.”

The first lockdown kept people indoors in the warmer months, when the climate was at its best and when people normally move homes. This led to a pent-up demand which clamoured to needs once the lockdown was lifted and people rushed to invest in good properties for sale in South Kensington.

Lack of Supply:

Due to Covid, more people are looking for detached houses instead of flats or apartments.  The demand exceeds the supply, resulting in a spike in the prices of such accommodation.  This was proved by the increase in prices of detached buildings exceeding that of flats or maisonettes.

Also, the constraints on building more houses have led to less supply.  Some of these are lack of space, environmental restrictions, congestion and preserving “green belt” land.  And, when supply does not meet demand, prices automatically rise.

Low-interest rates:

Some mortgage providers offer competitive loans with attractive rates of interest, making it feasible for buyers to apply for larger mortgages.  This, in turn, leads to the purchase of bigger homes which are, naturally, more expensive.  According to a reliable source, the number of approved mortgage loans reached a five year high in December 2020.

The low-interest rates have been an incentive for people to invest in properties, even for first-time buyers.  For an investor, the return on property investment with low-interest rates is more attractive than taking a risk in the stock market.

Owning your home:

Despite the decline in affordability, the desire to own a home is usually based on culture and economy. In some cases, parents or relatives are willing to help people with investing in their own homes.  The Government’s decisions to make things easier to buy property has helped in such investments.

Living in your own home is definitely better than renting a place.  Also, with incomes being hit and rentals rising, it has become very expensive to rent.  This has caused purchases to rise, which, in turn, caused price spikes too.


The future is not very clear.  However, the introduction of the Covid vaccine has hopes high for a return to near normalcy.  This, in turn, should result in a possibly much needed boost in the economy.  With these positives, house prices in London will likely remain high.