November Update

The Sales Market

It’s been a quiet month for London property sales. Prices have fallen by 1.1% in the UK, which is in line with the 1.1% fall this time of year which has historically been recorded in the country. According to Rightmove, overall asking prices in London fell by 1.9% in October compared to last year.

Many buyers are deciding to put their search on hold in the hopes that there will be major discounts next year due to the rise in interest rates and cost of living. While no one has a crystal ball, I would argue that there will not be a significant drop in prime central London (PCL) housing. The fact is only one in three people have used debt to buy their property in PCL. Most don’t need to sell, so there is no need for them to offer significant discounts. Savills have predicted a 2% drop in PCL in 2023, followed by a 13.5% growth in the next 5 years. Many homeowners are choosing to hold of selling now and to rent out their property instead until there is more of an appetite in the sales market. It’s becoming increasingly difficult to find good properties for sale because of this. 

It’s been an interesting time to manage buyer expectations. There are sensational headlines about the property market daily, however most of the articles have been referring to areas outside PCL, where buyers should be able to get bigger discounts. I certainly believe we are now in a buyer’s market, even in PCL – but the real opportunity has been the weakening of the pound for dollar-based buyers rather than big discounts. 

There was an interesting article in the Financial Times recently, that highlighted the fact that £5mn plus market is doing very well - “the central London market is booming and is now above pre-pandemic levels. So far this year, there have been 81 per cent more sales above £5mn than in the same period in 2019”. Areas such as Kensington and Chelsea, Mayfair and Belgravia have been doing very well due to dollar-based buyers taking advantage of the pound. In comparison however, outer neighbourhoods are down 19% compared to last year.

Mortgage rates have just come down from a high of 6.51% on the 20th of October to 5.95% - this is still obviously extremely high especially in comparison to the previously low rates. Rates should continue to come down, however there is no clear timeline to when that will be.

The Rental Market

As mentioned above, the rental market is booming. The increase in mortgage rates is holding off potential homebuyers (there are three times more prospective tenants than there were in 2021), sellers are unwilling to offer major discounts and therefore offering their flats to rent, creating a perfect storm for a rental boom.  

There are many prime properties coming to the rental market as a result of the slowdown in the sales market. The amount of properties for rent in London jumped by 15 percent year on year according to Chestertons. The agency stated that “This is the first time this year that we have seen stock rise year on year. A lot of it is coming from the sales side – vendors whose properties are not selling, or who are holding out for a better price.” 

According to Knight Frank, the average rents on properties that were newly let in London’s most expensive areas were up 17.8 percent year on year.