Prime Central London Market: What's Next?

Before drawing any speculative conclusions about the future of the Prime Central London (PCL) market, it is imperative to conduct a thorough analysis of recent events. Commencing with positive news, especially timely given the approaching holiday season, one significant concern occupying the thoughts of politicians, financial experts, savers, and homeowners for several months has been inflation. Fortunately, there is positive news on this front as inflation has receded to 4.6%. The recent pause by the Bank of England signals a perception that we may have navigated through the most challenging phase of economic uncertainty. In contrast to other regions of the UK witnessing substantial price declines, the prime London property market seems to be in a holding pattern. However, it's worth noting that affluent areas in the capital have not remained entirely insulated from the overall deteriorating economic sentiment. A key factor contributing to the resilience of the PCL market is that average property prices are still 16% below their peak in 2015. In contrast, PCL experienced a more modest 1.7% fall, demonstrating relative stability compared to the broader UK market. When examining buyer behavior, a notable trend emerges. While the number of new prospective buyers across the UK was 11% lower in Q3 compared to the five-year average, London experienced a contrasting increase of 13%. Additionally, exchanges in the capital rose by 14%, even as sales volumes decreased by 9% nationwide. Further contributing to the resilience of the PCL market, average prices are also 2% lower than pre-pandemic levels. This insight sheds light on why transaction volumes were 11% higher than the five-year average in September. Significantly, unlike the aftermath of the global financial crisis, property prices in London have displayed less volatility than in the rest of the country during the current economic turbulence. This indicates a certain level of stability and resilience in the London property market amid challenging economic conditions.

Anticipating a downward trajectory in inflation and the subsequent adjustment of interest rates, there is room for optimism regarding potential positive developments in the Prime Central London (PCL) market. As interest rates gradually decline to more manageable levels, there is the prospect of pent-up buyer demand gaining momentum, rejuvenating the market and potentially leading to an upswing in property values. While it may be premature to declare a complete turnaround, there are discernible signs of optimism emerging on the horizon for Prime Central London.

Prime Central London £5Million+ Market

There has been a discernible shift in the supply-demand dynamics within the £5 million-plus market in recent months, a trend that persisted into October. Sales volumes witnessed a significant decline of 31.6% compared to the same period a year earlier, accompanied by a notable increase of 20.4% in new instructions. While the drop in transactions may seem substantial, it's crucial to contextualize this within the broader trend of the past two years, which witnessed robust activity. The latest figure, despite the decline, remains 8.3% higher than the pre-pandemic (2017-2019) October average, indicating a return to more normalized demand levels.

A deeper examination of the market reveals additional insights when considering data on price reductions. Historically, the behavior of this measure exhibited relative consistency across all price points, with slightly more volatility observed in the £5 million plus category. However, in October 2021, less than one in five properties priced at £5 million plus underwent reductions before the sale, compared to almost half for properties priced under £1 million. This October, the figures converged, with 45.2% for properties under £1 million and 44.2% for those over £5 million. This convergence underscores how the top end of the market is now aligning more closely with the lower price bands.

For those seeking to capitalize on best-in-class opportunities and gain deeper insights into market developments, or for those interested in buying or selling, please reach out to Amit Patel at AmitP@NestSeekers.com.

References; Knight Frank, Lonres