Rents still rising, but rate of rental growth slows to two-year low
The prime London sales market showed a subdued performance in November, aligning with the trend observed throughout the year.
Prime London housing market data published by independent property analysts LonRes showed average achieved prices experienced a slight dip from the previous month, with an annual rate of change at -4.1%, marking the most significant fall since August 2019.
However, when viewed in the longer-term context, property values remained broadly unchanged from a decade ago, showing a 1.6% increase over the past five years and a 4.1% rise over the past decade.
LonRes noted that transaction levels in November saw a significant annual decline of 32.1, despite a notable number of properties going under offer in October. But the lack of a corresponding increase in fall-throughs suggests that deals are merely taking longer to materialise.
On the supply side, November witnessed a 5% increase in new sales instructions compared to the same month last year, potentially benefiting prospective buyers. While November’s sales activity may appear lower than the previous year, a broader historical perspective reveals that 2023 is only slightly below the long-term average, with records indicating that transactions from January to November are within 10% of the average recorded between 2005 and 2022.
Despite the apparent slowdown, LonRes said there are indications that buyer sentiment in the prime London sales market is improving. One key metric is the number of enquiries from buying agents, which has steadily increased over the past four to five years, with the 12-month average currently more than triple the levels seen in 2017 to 2019.
The £5 million-plus market has emerged as the best performing sector since 2020, maintaining its strength at the close of 2023. Although sales volumes were 28% lower in November compared to the previous year, this market segment remains resilient, with a 1.4% increase in new instructions and a 16.1% rise in properties going under offer.
“Agents are always looking for reasons to be optimistic and November provided some emerging signs of improving sentiment in the prime London sales market,” commented Nick Gregori, head of research at LonRes.
“Inflation is heading back towards its 2% target and mortgage rates – while still well above the levels seen in past years – fell back from recent highs. We’re hearing that central London agents are busy with market appraisals and buyer enquiries, although our prime London data doesn’t yet reflect this positivity in terms of actual agreed deals. But the national house price indices did record improved figures in November, contrary to what many in the industry were expecting earlier in the year.
“Our November data showed another small fall in sales values and transactions were well below the same month last year. Supply is increasing slightly, with both the flow of new instructions and the stock of homes available to buy up a small amount on last year. While not a direct measure of demand, our log of buying agent enquiries has increased strongly through the year and is at its highest ever level since our records began in 2008.”
Rental growth slows in prime London lettings market
Meanwhile, the prime London lettings market experienced a slowdown in November 2023, as it usually does towards the end of the year.
Annual rental growth across prime London slowed to 6.9%, marking the slowest pace since September 2021. Rents, however, remain 31.9% higher than their pre-pandemic average from 2017 to 2019.
Tenant demand remains relatively high for this time of year, though recorded activity is lower due to a significant number of properties being let without listing, thus escaping data capture.
Lets agreed for November also dropped by 6.7% compared to the previous year and were 53.1% lower than the average levels recorded in November 2017 to 2019.
On a positive note, annual growth in new instructions was 14.5% in November, signalling a gradual recovery in supply. At the end of November, there were 58.9% more properties on the market to let than a year earlier, although this level remains 33.7% below the figure recorded at the end of November 2019.
“The lettings market usually quietens down after the autumn rush, and this year is no different,” Gregori said. “Rental growth across prime London remains relatively strong, but an annual rise of 6.9% in November is the slowest in more than two years.
“Available stock continues to rise relative to the low base set last year, and as usual, we must note that activity remains difficult to analyse due to the limited sample of properties actually being listed.”
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