January London Housing Market Report

Amit Patel
Feb 9, 2023
3 min read

Housing Returns to Pre-Pandemic Levels

Housing market activity slowed in the final quarter of 2022 and this has carried through into the first month of 2023. The economic and political turmoil created by the Truss minibudget has eased but interest rates are much higher than this time last year and buyer demand has subsequently fallen back. While the prime London market is not seeing the same impact as the broader and more mortgage-dependent UK market, sales activity has been lower than seen in recent years and prices have fallen slightly (-1.4% over the last year).

Under offers (a leading indicator for sales) and sales were consistently above their pre-pandemic levels in 2022 until the mini-budget fallout hit the market in October last year. The number of under-offers fell from 41% above 2019 levels in September, to 11% below in October. Since then, they have hovered around 2019 levels, with under offers 4% higher in January 2023 than over the same month in 2019. The situation for sales was similar, although it took a bit longer for the impact to feed through. Sales fell to 23% below 2019 levels in December but bounced back in January 2023 to 3% higher than the same month in 2019. However, the figure for January last year (2022) was 37% higher. It appears the pandemic housing boom has ended, at least for the time being.

Sellers become more realistic.....

With weaker demand and lower sales activity since the mini-budget, it is not surprising that some sellers have had to become more realistic about the price they can achieve. Pricing levels often lag the market and this is what we’re seeing now. The recent boom and a lack of homes available to sell may have encouraged some to try and achieve prices last seen prior to the mini-budget. But the market has changed. While some sellers may choose to withdraw their homes from the market, others may need to be more realistic about the value others put on their homes if they’re serious about selling. LonRes data shows the number of properties recording price reductions has increased since the end of September. While much lower than the absolute numbers recorded in October and November last year, the number of properties seeing price reductions in January 2023 was the highest for that month since 2018 according to LonRes records. Further analysis shows that it is the top end of the market that has seen the biggest increase in price reductions compared to last year, perhaps reflecting the increase in available supply in that part of the market.

Luxury Property Market Remains Robust.....

While the broader prime London housing market has returned to pre-pandemic levels of activity, the top end of the market is still strong. January 2023 saw a continuation of this trend, with both rising sales and new instructions of properties priced at £5 million or more – perhaps encouraged by sellers being more realistic on pricing. The number of new instructions across the whole of the LonRes three prime areas (but primarily in prime central London), in January 2023 was 167% higher than in January 2019 and 43% higher than in January last year. The number of sales of £5 million-plus properties has also increased. The number of sales in January 2023 was 92% higher than January 2019 and 56% higher than in January last year. It appears the resurgence in sales activity and recovery in prices in this market has helped encourage the largely discretionary sellers to list their homes, resulting in a feedback loop that has led to more sales and more homes being listed for sale. However, with high numbers of new instructions, the number of homes on the market at £5 million or more is rising (15% higher than last year). This might be a concern in the wider market, especially with the 10% decline in under-offers compared to last year. While many sellers have adjusted their price expectations given the number of price reductions, the discretionary nature of the top-end market suggests many others will simply withdraw from the market if they fail to achieve the price they expect. And this appears to be the case, with January 2023 recording the largest number of properties withdrawn from the £5 million-plus market in a single month according to LonRes records.