Prime housing market confidence softens amid uncertainty, Savills finds
Savills said continued domestic and geopolitical uncertainty has weighed on confidence at the top end of the housing market, with prime prices falling across the UK.
Continued domestic and geopolitical uncertainty has eroded buyer and seller confidence at the top end of the housing market, according to research from Savills.
The international real estate adviser said the prime market had continued to be more price sensitive than the mainstream market, although activity had remained close to last year’s levels.
Savills said prices had fallen across prime markets, with prime Scotland and the North of England proving the most robust.
Frances McDonald, director of residential research at Savills, said: “The prime housing market is becoming increasingly cautious. When surveyed, Savills agents agreed that confidence among both prospective buyers and sellers is continuing to soften.
“Taken before the Makerfield by-election and the Prime Minister’s resignation but against a backdrop of ongoing uncertainty in the Middle East, this decline in market sentiment has been reflected in further price falls as buyers have tightened their budgets ’ comments Frances McDonald, director of residential research at Savills.
‘But at the same time, sellers have also reined in their price expectations, And the increasing alignment in expectations, has supported ongoing market activity despite a thinner seam of demand.’”
Statistics from TwentyCI showed that throughout Q2, net agreed sales were within 95% of last year’s levels across the whole market. For homes above £1m, the figure was 94%, while above £2m it was 91%.
Savills said prices in prime central London fell by 1.7% over the past 3 months, a similar pace to the falls seen before last year’s Budget. Values in the market are now 26.3% below their 2014 peak.
The firm said the tax environment continued to weigh on international demand, with nearly half of agents reporting that international demand had reduced in London. While the pace of price falls increased across all parts of prime central London during the quarter, Savills said some areas were proving more resilient.
Notting Hill continued to benefit from needs-based demand for family housing, recording annual price falls of less than 4%, compared with falls of 7% across more fringe central London neighbourhoods including Westminster and Pimlico.
Despite further mortgage volatility, Savills said more domestic outer prime London markets had remained more resilient, with prices falling by 1.1% overall in Q2. House prices in outer prime London fell by 0.7%, compared with a larger decline for flats.
Values in west and south west London have also held up better over the past year, falling by 1.2% and 1.5% respectively.
McDonald added: ‘Best in class properties in areas such as Barnes, Clapham and to the east Hackney and Victoria Park still command a premium, especially those which don’t come to market very often. Where there is the opportunity to acquire what could be a once in a generation home buyers remain motivated and correctly priced properties are going to competitive bidding, with buyers being prepared to pay for something that fulfils all their criteria.’
Across prime regional markets, values fell by 1.7% in Q2 and 3.8% annually. Savills said the debt-driven commuter belt and more discretionary top-end country house markets had been most affected, although there remained appetite for exceptional country houses.
Savills said needs-based urban markets were outperforming more rural locations as the market continued to rebalance after Covid, with Edinburgh and Cheltenham among the strongest performers.
McDonald said: ‘While the market for rural properties has become noticeably more sticky, values in urban locations are holding up better. Driven by needs based buyers these markets benefit from the connectivity, good transport links and a demand for schools and have shown more resilience compared to the more discretionary rural markets.’
The Savills survey also found that almost all agents said deals were taking longer to progress, with particular delays between offer accepted and exchange.
McDonald said: “The time taken for deals to reach exchanges is reflective of the caution in the market, this lack of urgency is the polar opposite of what we experienced during the mini housing market boom, that now seems a distant memory.
“Given domestic political uncertainty, we expect the prime market to remain price sensitive over the remainder of the year, despite the prospect of less geo-political uncertainty and a recent tempering of mortgage rates”
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