The price of prime property in central London fell by almost 5% over the past year, marking the biggest annual drop in three and a half years, according to data
provider LonRes. The decline, which began in late 2022, is being attributed to the UK’s poor economic outlook and fears of a further downturn in the housing market. The discretionary nature of the central London markets means that buyers and sellers are able to remain in a stand-off. Wealthy buyers with multiple homes are under less pressure to buy, whilst sellers are often in a better position to wait out the downturn.
The price of prime property in central London now stands at £1,261 per square foot, down from £1,326 a year earlier, according to LonRes. The London areas most affected are the high-end areas such as Mayfair and Kensington that rely on cash-rich foreign buyers. Property values there tend to be less susceptible to the recent rise in mortgage costs.
However, buyers have become more cautious over concerns that prices could still fall further due to concerns over the economic outlook and rising interest rates. Transaction numbers in March were down by a fifth compared to the same month in 2022, while prices per square foot dipped below the three-year pre-pandemic average for the first time in nearly two years, according to the data.
James Forbes, director at high-end London estate agency Forbes Gilbert-Green, is concerned about the future. “My longer-term concern would be: do we maintain our position as a global financial centre? The concern for all of us in prime central London is ‘brand London’ and ‘brand UK’ remaining positive.
That drives our market.” Central London’s property market experienced a boost between mid-2021 and autumn last year, sparked by the easing of Covid-19 travel restrictions and foreign buyers taking advantage of the weak pound and low interest rates. However, the “mini” Budget of former Prime Minister Liz Truss last September marked a turning point as investors’ confidence in the UK fell sharply and a large number of home sales fell through.
Richard Donnell, executive director at property search website Zoopla, commented: “To invest in London you want economic and political stability”. Despite predictions that higher mortgage costs could knock 10% off house prices, the wider UK housing market has so far defied the forecasts with relatively small declines registered in recent months. Photo by Paul Farmer, Wikimedia commons.