Demand Improves in Lower-Value Prime London Markets
March 2024 PCL sales index: 5,310.7
March 2024 POL sales index: 273.1
2 minutes to read
The best way to describe the recent performance of the UK property market is ‘ten weeks of recovery followed by ten weeks of drift’.
It is a pattern shaped by interest rate expectations, with mortgage costs dipping and rising as signals around inflation have been frustratingly mixed.
The result is a lack of urgency among buyers, a fact compounded by rising supply. The number of sales instructions in London was 17% above the five-year average in the first quarter of 2024.
This mood of circumspection means needs-based buyers are currently playing a bigger role in driving activity.
While this has benefitted lower-value markets, where a higher proportion of domestic buyers move for education or employment, there has been more hesitancy in discretionary, higher-value markets. Uncertainty around recent rule changes for individuals with non-dom tax status may have aggravated the situation.
For overall momentum to grow, a bank rate cut needs to feel much more imminent. After hovering above 4% since the start of February, a five-year swap rate starting with a ‘3’ would provide a boost for lenders and borrowers.
For now, the evidence from the first quarter of this year only highlights the difference between higher and lower-value markets.
The number of new prospective buyers between £750,000 and £2 million was 21% above the five-year in the first three months of year, Knight Frank data shows. Above £5 million, the increase was just 3%.
Meanwhile, the total number of offers made between £750,000 and £2 million was 6% higher, while above £5 million there was a 6% decline.
A comparison between south-west London (where demand is typically more needs-driven) and prime central London (PCL) paints a similar picture, as the graph shows.
The number of new prospective buyers, offers made and exchanges have all been notably higher in the south-west of the capital over the last six months.
“There is strong buyer demand and lots of new instructions are getting agreed,” said Luke Ellwood, head of south-west London sales at Knight Frank. “The number of properties under offer has grown sharply in recent weeks.”
Indeed, the two London areas with the strongest price growth in the year to March were Wandsworth (+2.6%) and Dulwich (+2.3%).
Furthermore, while the average price change for all flats in prime central London was -2.9%, the equivalent decrease for houses in prime outer London (POL) was -0.2%.
Overall, average prices in PCL fell 2.4% in the year to March, the same figure as recorded in February. Meanwhile, prices were down by 1.5% in POL after rising by 0.1% on the previous month.