Prime London residential markets show ‘remarkable resilience’
Prices across London’s prime markets fell a marginal -0.2% on the quarter, and -1.0% on the year, according to the Q2 Savills prime London index, leaving values 3.9% above their pre pandemic level.
Prime central London held up better than outer prime London, indicating a growing divergence between cash and equity rich buyers and other groups in their ability to transact, and between the very top end of the market and lower value segments.
| Q2 2023 | Prime Central London | North West | South West | West | North and East | All prime London |
| Quarterly growth | -0.1% | -0.3% | 0.0% | -0.2% | -0.6% | -0.2% |
| H1 2023 growth | -0.1% | -0.5% | 0.1% | 0.3% | -0.2% | -0.1% |
| Annual growth | -0.9% | 0.0% | -1.0% | -1.9% | -1.2% | -1.0% |
| Growth since March-20 | 1.7% | 6.3% | 8.2% | 5.6% | -1.0% | 3.9% |
Source: Savills prime London index, Q2 2023
Cash buyers who are not exposed to concerns around rising interest rates dominated demand in the second quarter. Year to date, cash buyers have accounted for 71% of prime central London deals and 35% in outer prime London, according to Savills records.
“The established prime markets most synonymous with equity rich buyers are holding up the strongest amid mortgage market turbulence,” according to Frances McDonald, director of residential research at Savills.
“While London’s prime market continues to perform more strongly than expected, the most recent interest rate rises are likely to squeeze buyer budgets and increase price sensitivity, particularly in the more domestic outer prime locations where more buyers are dependent on borrowing. Sellers will need to price pragmatically to align with prevailing buyer expectations.”
Divergence by value band
This has resulted in a growing divergence between lower value homes in prime locations, which are typically more exposed to debt, and the more resilient top end, Savills says.
On an annual basis, prices for the £5 million-plus market across prime London remain flat (-0.1%), while the £500,000-£1m market has seen some falls (-2.1%), and the under £500,000 market has fallen further still (-2.5%).
Cautious return of international demand
Mayfair (+1.1%), Westminster (+0.4%) and Marylebone (+0.2%), popular with pied-a-terre and international buyers were some of the strongest performers on the quarter. More domestic markets such as Richmond (-0.9%) and Holland Park (-1.0%) that outperformed during the pandemic have seen value falls over the first half of the year.
“International travel picked up at the start of this year, led by passengers from Asia, the Middle East and the US. While this has translated into increased demand, buyers at the top end remain discerning,” notes McDonald.
Best in class property dominating
Savills index reveals that best in class properties are holding up best in more fragile market conditions. Properties considered in immaculate condition across prime central London command an average price of more than £2,000/ sq ft, 37% higher than those considered to be in a poor condition, compared to a premium of 25% around 10 years ago.
Liza-Jane Kelly, head of London residential comments , “Amidst slower market conditions, best in class properties and unique homes are continuing to conjure significant demand – and in some micro-markets – the very best quality homes are continuing to result in sealed bids. But, stock constraints are beginning to ease.
“The more stock-constrained locations which offer office workers a base close to their workplace, as well as turnkey and lock up and leave properties in prime central London neighbourhoods are performing best.”