WATERFRONT VIEW MARKET OVERVIEW 2022
The waterfront property market continues to attract a wave of new buyers and their spending power is at a 10-year high
BY CHRIS DRUCE Senior Research Analyst, Residential Research
Waterfront property has remained at the forefront of the search for greenery, space, and a pandemic-inspired change in lifestyle over the last 12 months, with demand continuing to outstrip supply.
Despite the end of the stamp duty holiday last September, UK waterfront exchanges were up 8% in the 12 months to May versus the five-year average.
Demand has remained resilient too, with viewings of UK waterfront property up 11% in the same period and offers accepted up 9%.
The new buyers coming into the UK waterfront market are looking to spend big too to secure the right property, with the potential spend of new prospective buyers at a decade-long high of £1.7bn in the 12 months to May. The figure was up 13% on the £1.5bn registered in the 12 months to May 2021.
However, sustained demand and tight supply means the amount of waterfront property for sale has fallen over the course of the pandemic outside of London. Supply outside of the capital is down 22% in the 12 months to May 2022 versus the 12 months to May 2020.
This imbalance between supply and demand has continued to keep upwards pressure on prices, with annual average growth of 9.8% in the 12 months to June for UK waterfront properties. The desirability of a waterside setting to buyers means a property next to water commanded, on average, 50% more than an equivalent non-waterfront home in the second quarter of this year.
We expect a slowing of price growth in the prime property market by the end of this year as supply improves and economic headwinds temper demand. However, interest in the waterfront lifestyle remains high, with web views up 12% in the year to May vs the five-year average, suggesting a period of moderation rather than a dramatic reversal in fortunes is ahead for the waterfront market, which also benefits from its evergreen appeal among buyers.
WATERFRONT VIEW MARKET OVERVIEW 2022
The waterfront property market continues to attract a wave of new buyers and their spending power is at a 10-year high
BY CHRIS DRUCE Senior Research Analyst, Residential Research
Waterfront property has remained at the forefront of the search for greenery, space, and a pandemic-inspired change in lifestyle over the last 12 months, with demand continuing to outstrip supply.
Despite the end of the stamp duty holiday last September, UK waterfront exchanges were up 8% in the 12 months to May versus the five-year average.
Demand has remained resilient too, with viewings of UK waterfront property up 11% in the same period and offers accepted up 9%.
The new buyers coming into the UK waterfront market are looking to spend big too to secure the right property, with the potential spend of new prospective buyers at a decade-long high of £1.7bn in the 12 months to May. The figure was up 13% on the £1.5bn registered in the 12 months to May 2021.
However, sustained demand and tight supply means the amount of waterfront property for sale has fallen over the course of the pandemic outside of London. Supply outside of the capital is down 22% in the 12 months to May 2022 versus the 12 months to May 2020.
This imbalance between supply and demand has continued to keep upwards pressure on prices, with annual average growth of 9.8% in the 12 months to June for UK waterfront properties. The desirability of a waterside setting to buyers means a property next to water commanded, on average, 50% more than an equivalent non-waterfront home in the second quarter of this year.
We expect a slowing of price growth in the prime property market by the end of this year as supply improves and economic headwinds temper demand. However, interest in the waterfront lifestyle remains high, with web views up 12% in the year to May vs the five-year average, suggesting a period of moderation rather than a dramatic reversal in fortunes is ahead for the waterfront market, which also benefits from its evergreen appeal among buyers.
Increase in offers accepted for London waterfront property.
12 months to May vs 5-year average Source: Knight Frank research
Average premium for a waterfront property in the UK vs non-waterfront.
Source: Waterfront Index Q2 2022
Increase in the average UK waterfront property price in the 12 months to June.
Source: Waterfront Index Q2 2022
WATERFRONT BUYERS IN 2022
Buyers from the South East, South West and London were the main purchasers of waterfront homes outside of London in the year to May, making up 72% of purchases collectively. Sales of waterfront properties as second homes increased by 62% in the 12 months to May versus the five-year average, making up 10% of all second home sales transacted by Knight Frank in the UK.
The UK property market has defied gravity over the course of the pandemic. Tight supply, low interest rates, accumulated household wealth and a desire for more space and greenery have conspired to produce double-digit house price growth over the last year. We believe that 2022 is when this begins to unwind, and growth returns to single figures (see Prime sales market forecast).
We forecast that growth will be 6% in 2023 as the return of international buyers gathers pace, and 22.2% over the next five years, making it the top-performing sector and bucking the overall trend.
It is a similar story in prime country markets, where prices are forecast to grow 17% over five years. All prime markets are expected to outperform the mainstream, with cumulative growth in the mainstream market expected to be 13.6% from 2022 to 2026.
WHERE NEXT FOR PRIME MARKETS?
The UK property market has defied gravity over the course of the pandemic. Tight supply, low interest rates, accumulated household wealth and a desire for more space and greenery have conspired to produce double-digit house price growth over the last year. We believe that 2022 is when this begins to unwind, and growth returns to single figures (see Prime sales market forecast).
In prime central London we forecast 3.5% growth this year as the property market inside zone 1 continues its overdue recovery after six years of political uncertainty and the emergence of a more adverse tax landscape.
We forecast that growth will be 6% in 2023 as the return of international buyers gathers pace, and 22.2% over the next five years, making it the top-performing sector and bucking the overall trend.
We expect prime outer London to continue to benefit from the ‘race for space’ this year, which is likely to tail off from 2023, producing 15.9% growth over the five-year period.
It is a similar story in prime country markets, where prices are forecast to grow 17% over five years. All prime markets are expected to outperform the mainstream, with cumulative growth in the mainstream market expected to be 13.6% from 2022 to 2026.
“The potential spend of new prospective buyers [was] at a decade-long high of £1.7bn in the 12 months to May.”
Prime sales market forecast 2022-2026
Source: Knight Frank. Forecasts relate to average prices in the second-hand market. New-build values may not move at the same rate.
Total potential spend of new prospective waterfront buyers 12 months to May
