London’s Resilience: Prime Property Prices

October 13, 2023

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London price resilience

Article Summary

London
  • While the rest of the UK have fluctuated in terms of property stability, with some areas doing better than others, the capital's more affluent postcodes have remained relatively steady.

  • As the autumn market unfolded, there was a 12% increase in new prospective buyers in London between August and September.

  • Looking at the entire UK market, prices are expected to decline by 7% in 2023, which will still leave them more than 10% higher than pre-pandemic levels.

Introduction

Despite the perceived economic turbulence and uncertainties, London’s prime property market is demonstrating resilience. While the rest of the UK have fluctuated in terms of property stability, with some areas doing better than others, the capital’s more affluent postcodes have remained relatively steady. The prime central London market experienced a more moderate 1.7% fall, with prime outer London witnessing a decrease of 1.4% – higher than the nationwide average reported by the Nationwide index.

One of the primary factors contributing to this resilience is the fact that average prices in prime central London are still 16% below their peak in 2015, while those in prime outer London are also climbing back to their pre-pandemic peaks. Moreover, average prices are just 2% lower than pre-pandemic levels in prime central London. This explains why transaction volumes were 7% higher than the five-year average in September, as property investors have spotted the secure opportunity to invest in the capital.

The latest development in this scenario is the Bank of England’s decision to pause its cycle of interest rate hikes in September. While this signifies a temporary reprieve for the market, it hasn’t yet translated into a surge in demand.

Central London property investment

London’s Recent Property Market Trends

As the autumn market unfolded, there was a 12% increase in new prospective buyers in London between August and September. Although this marks a positive shift, it’s worth noting that it was only half the increase witnessed in the preceding two years. In more politically stable times prior to 2016, the same rise was over 40%.

Overall, it appears that the prime London property market is currently in a holding pattern. While it hasn’t experienced the significant price declines seen across the UK, neither have London’s affluent areas been entirely immune to the broader economic sentiment.

Knight Frank’s updated forecasts reflect the expectation that most of the decline in house prices across the UK will take place this year. They are forecasting a 3% decline in both prime central and outer London for 2023. These markets are expected to outperform the rest of the UK in terms of trading activity and price performance.

However, the picture changes when we look at the broader UK market. The number of new prospective buyers across the UK was 11% lower in the third quarter of this year compared to the five-year average. In contrast, London saw an increase of 13%, according to Knight Frank data. Furthermore, there was a 14% increase in exchanges in the capital, while sales volumes declined by 9% across the country.

 

Factors Contributing to Resilience

The prospect of house prices rising again in the new year presents a fantastic opportunity to invest in UK properties this year, to take advantage of the capital appreciation potential and capitalise fully on the resilience of London developments specifically.

Looking at the entire UK market, prices are expected to decline by 7% in 2023, which will still leave them more than 10% higher than pre-pandemic levels. It’s noteworthy that, unlike after the global financial crisis, property prices in London have demonstrated far less volatility compared to the rest of the country during this period of economic uncertainty.

It is also worth noting that, by investing in new-build developments in London, investors will be skipping these ‘declining property prices’ and ‘uncertain mortgage rates’, as new-build developments would complete in the next couple of years, effectively coming onto the market as completed units. Investors will profit from this, as house prices will be on the rise, with mortgage rates also set to stabilise over 2024. Coupled with the high tenant demand that London naturally boasts, investors are set to benefit greatly from new-build properties in the long-term.

London property investment

Conclusion

In summary, London’s prime property market has navigated economic turbulence with relative stability. While the rest of the UK has witnessed significant declines in property prices, London’s affluent postcodes have remained robust. The capital’s ability to maintain this resilience is primarily attributed to the gap between current prices and the peak in 2015, which has allowed transaction volumes to outperform the broader UK market.

Knight Frank’s forecasts suggest that, while some decline is expected in 2023, London’s prime property market will continue to demonstrate resilience and present the perfect chance for investors to grow their portfolio. London properties may not drop to these prices again anytime soon, with price rises on the horizon and rewarding rental yields with most central London projects, and new-build properties presenting a positive, beneficial opportunity to investors.

To find out about more of some of the most attractive new-build and regeneration projects that London has to offer, click here.

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