March Update

March proved to be another robust month for the prime central London market (PCL). Again, despite dramatic headlines, prices are only down 1.4% year on year, however they remain 3.3% higher than 2019 (pre-pandemic). There is significantly more activity in the market in comparison to the last quarter of 2022. According to Knight Frank, offers accepted are up 30% and exchanges are up 8%. Beyond the actual numbers, it’s interesting to see what’s happening in the market.

A tale of two markets

While we are generally in a buyer’s market, I would argue that it’s a seller’s market for best-in-class properties. These properties are few and far between as most sellers are choosing not to sell unless they must. In most cases, the reason for selling isn’t financial (most homes in PCL are mortgage free and owners are less affected by cost of living), but rather due to upsizing or moving countries so they are quite bullish on pricing. For properties that are less in demand, it is more of a buyer’s market and further discounts are possible. These tend to be properties on the lower end of the market that are typically purchased with a mortgage.

Prime market

One segment of the market that is very busy at the moment is the £5m and up price bracket. According to data collected by Lonres, sales in January were 97% higher than they were in 2019. To help meet this demand, the volumes of homes coming on the market in this price bracket are 167% up in comparison to 2019. Buyers in this price bracket tend to purchase with cash so they are not as affected with the higher interest rates, keeping the market busy.

Return of the foreign buyer – price increases in South Kensington and Knightsbridge

During the pandemic, prime central London apartments were less in demand. This segment of the market is driven by foreign buyers, who were unable to fly into London. Houses in less central areas took centre stage, as local buyers wanted more space during lockdown.

As the days of lockdown are behind us, we are seeing a return of the prime central London apartment. According to Knight Frank, “the proportion of flat sales in PCL in Q4 2022 was 74%, which was the highest level in three years”.

This obviously benefited areas where apartments are more prevalent – year to date, prices in South Kensington are up 5.5% and 4.5% in Knightsbridge. These are the two strongest price growths areas in PCL so far this year.

Is now the right time to buy?

Knight Frank are predicting that PCL will be down 3% this year and remain flat next year, however there will be a cumulative growth of 8.1% over the next 5 years. I’m advising all my clients that although some headlines on economy are negative, it’s better to buy when market conditions are calmer/flat in comparison to buying when prices are rising. If you are considering purchasing in London as a long-term investment, it has historically been a safe/lucrative place to invest.

It’s also important to set expectations – some buyers are expecting significant discounts for best-in-class properties, however due to the low amount of stock in this segment, this isn’t feasible. These homes can sell at asking price or close to asking, or even above asking if there is competition from other buyers. This is why it’s imperative that buyers are able to act with speed, which is why working with a buying advisor is essential. A buying advisor will ensure you are the first through the door and that you are able to move with speed in securing the property. Moreover, they will ensure you buy the right property that will be easier to sell when required.

If you are interested purchasing a property in London please reach out for a free consultation.