2023 may have been characterised by rising interest rates, high inflation, and an uncertain economy, but the long-term trend for prime London’s housing market is one of stability, according to analysis from LonRes.
Research by the independent property analysts revealed that achieved sold prices across prime London may have fallen in December, finishing the year 6.2% down compared to a year earlier, but they were 0.9% higher than five years ago and 1.7% higher than 10 years ago.
Transactions in December were also down 16.6% compared to the same month last year.
For the full year this resulted in an 18.5% annual fall, but transactions remain 2.1% higher compared to the pre-pandemic (2017 to 2019) annual average.
Traditionally a quiet month, the number of properties going under offer in December was lower than a year ago (by 16.9%).
Over the full year this measure was only 11.5% down on 2022 (compared to 18.5% for sales).
In addition, the research revealed that new instructions in December decreased by 8.6% on an annual basis but 2023 finished only 0.5% down in total.
Overall, the combination of supply and demand activity over the course of the year means that there was 7.2% more stock on the market across prime London on 31st December than a year earlier.
The £5m+ market continued to be the standout market of 2023 with 47% more transactions compared to the 2017 to 2019 average.
However, £5m+ sales in December fell by 9.5% compared to a year earlier but new instructions were up 8.3% on the same basis.
The pace of annual rental growth across prime London slowed to a 29-month low of 3.5% in December. However, rents remain 29.0% above their 2017-19 (pre-pandemic) average.
Nick Gregori, head of researchat LonRes, said: “While news about the wider economy has been mixed the relatively improved outlook for interest rates does appear to have sparked buyer interest at the start of the New Year.
“Agents have been reporting increasing numbers of viewings which we would expect to feed into transactions over the coming months.
“Stock levels have been growing steadily (up 7.2% on the year across prime London), but there is no major excess of supply.
“Price falls have been relatively limited, with annual falls of 6.2% reversing the post-pandemic rises and taking values broadly back in line with the levels seen over the past decade.
“Further significant falls in prime London are unlikely given the lack of growth in recent years and the amount of equity in the market.”
He added: “Activity in the £5m+ price band at the end of 2023 slowed relative to 2022 but remained high compared both to historical trends and to lower price points.
“This market sector is less dependent on domestic mortgaged buyers, so it is the outlook for high-net-worth individuals around the world that is perhaps more important.
“Conflict escalating in the Middle East could be seen as a negative impact, but similarly it reinforces the appeal of London as a ‘safe haven’ for investors.
“The prime London letting market showed little signs of recovery in December – unsurprisingly as it is typically a quiet month.
“New instructions are growing slowly and combined with the falling number of agreed lets the stock of properties to rent grew 60.4% over the year, but off a very low base. While annual rental growth has slowed to 3.5%.”
