But long-term trend signals a stable market
The prime London property market concluded 2023 with transaction levels marginally surpassing pre-pandemic figures, albeit with average prices experiencing a slight decline.
Prime London housing market data published by independent property analysts LonRes showed that throughout December 2023, achieved prices dipped, resulting in an annual rate of change of -6.2%.
In a broader context, however, values remained relatively stable over the long term, showing a modest increase of 0.9% compared to December 2018 and a 1.7% rise from a decade ago.
December witnessed a 16.6% drop in sales activity compared to the previous year, accompanied by an 8.6% decline in new sales instructions. When compared with the 2018-19 average, new sales instructions were down by 2.1%. These monthly metrics provide a snapshot of the entire calendar year, revealing lower activity in 2023 compared to 2022 but surpassing 2017-19 average levels.
LonRes’ analysis of the prime London housing market also showed a 7.2% increase in the stock of homes available for purchase in prime London by the end of 2023, reflecting a 30.6% rise from the end of 2019. The market’s sentiment fluctuated between buyers and sellers during the period from autumn 2022 to the present, influenced in part by rising interest rates. Sales figures indicate a faster decline in transactions than under-offer numbers, hinting at lingering demand, albeit with prolonged transaction times and increased fall-through rates.
Latest data suggests that time is a critical factor, with fall-throughs in 2023 decreasing by 6.2% compared to 2022 but rising by 42.5% compared to the 2017-19 average. Withdrawals in the same period saw a marginal increase of 0.6%. The average time from under offer to exchange extended from 100 days in 2022 to 105 days in 2023, signalling the need for patience in the current market.
Growing Prime London lettings supply tempers rental growth
The prime London rental market experienced its typical seasonal slowdown in December, with average rents declining month-on-month. Annual rental growth decreased to 3.5%, the lowest level in 29 months, yet still 29% higher than the pre-pandemic average.
Rental trends across submarkets exhibited similar patterns over the past few years, with prime catchment areas, including St. John’s Wood, Notting Hill, and Marylebone, outperforming others by maintaining higher values.
December saw a decline of 11.7% in newly agreed lets compared to the previous year, contributing to a yearly drop of 10.3%. New instructions rose by 2.8% in December, with 2023 seeing a 1.7% decrease compared to 2022. The supply of properties on the market for rent increased by 60.4% compared to the previous year, although this figure was 31.4% lower than at the end of November 2019.
“While news about the wider economy has been mixed, the relatively improved outlook for interest rates does appear to have sparked buyer interest at the start of the New Year,” Nick Gregori, head of research at LonRes, commented. “Agents have been reporting increasing numbers of viewings which we would expect to feed into transactions over the coming months.
“Stock levels have been growing steadily (up 7.2% on the year across prime London), but there is no major excess of supply. Price falls have been relatively limited, with annual falls of 6.2% reversing the post-pandemic rises and taking values broadly back in line with the levels seen over the past decade. Further significant falls in prime London are unlikely, given the lack of growth in recent years and the amount of equity in the market.
“The prime London letting market showed little signs of recovery in December – unsurprisingly as it is typically a quiet month. New instructions are growing slowly and, combined with the falling number of agreed lets, the stock of properties to rent grew 60.4% over the year, but off a very low base, while annual rental growth has slowed to 3.5%.”
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