Prime London property market not immune to weak sentiment
October 2023 PCL sales index: 5,377.0
October 2023 POL sales index: 273.3
2 minutes to read
With the benefit of hindsight, the UK housing market possibly didn’t need a stamp duty holiday in July 2020, four months into the pandemic.
Trading activity was strong during successive lockdowns as people reassessed how and where they lived.
Some form of UK-wide support would certainly be welcome now though, given the negative events supressing demand. We will find out if the government has a plan in the Autumn Statement later this month.
In the meantime, the number of UK mortgage approvals was more than a third below the five-year average in September and transaction volumes were down by just under a quarter.
Unlike the early months of Covid or the period following the mini-Budget, there is no single cause of the slowdown. Sentiment has been affected by a series of factors including the financial pain of higher mortgage rates, the Bank of England’s struggle to contain inflation, the impending general election, and uncertainty arising from overseas military conflicts.
The weak sentiment extends to London’s prime postcodes.
Activity in prime central and outer London this October was similar to the same month in 2022, a moment of high uncertainty after the mini-Budget caused a spike in rates and the widespread withdrawal of mortgage products.
The number of new prospective buyers registering in London was only 1.2% higher, exchanges were 2.2% higher and the number of viewings was 1.4% lower.
A greater proportion of cash buyers and higher levels of housing equity help protect prime London markets to some degree, but they have less effect on overall sentiment.
A rise in the supply of higher-value lettings properties demonstrates how some prospective sellers are hesitating and opting to let out their property instead, as we explored last month. The number of rental properties coming to the market in prime central London above £1,000 per week was 22% higher in October compared to the same month last year.
Meanwhile, prices also reflect the current mood of uncertainty.
Average prices in prime central London fell 1.6% in the year to October, with 1.2% of the decline taking place in the last six months. The quarterly fall of -0.9% was the biggest since July 2020, the month that the stamp duty holiday was introduced.
Activity in prime outer London (POL) was supported more by needs-driven buyers. That said, average prices in POL fell 1.4% for the second consecutive month, the biggest drop since February 2021.
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