London’s prime property market is showing signs of stabilising after a weak final quarter in 2022, thanks to mortgage rates heading below 4% after spiking above 6% in the aftermath of the mini-Budget.
Data from Knight Franks found that prices in prime central London (PCL) were flat on a quarterly basis in February, compared with a 0.6% decline in the three months to December.
Meanwhile, prices in prime outer London (POL) rose by 0.2% in February, the first monthly rise since September.
The number of new prospective buyers registering in London in the first seven weeks of 2023 was 28% higher than the five-year average.
However, activity was stronger in higher price brackets, where there is less reliance on mortgage debt.
The average rate for a 5-year fixed mortgage is headed below 4% after spiking above 6% in the aftermath of the mini-Budget.
Financial markets took fright at the inflationary potential of the previous Government’s low-tax economic plans, but nerves are settling under new prime minister Rishi Sunak.
“Nerves have settled and the aftershock of the mini-Budget is dissipating,” said Rory Penn, head of London sales at Knight Frank. “However, the true test of strength across all price points will be the spring market.”
On an annual basis, average prices were essentially flat in February in PCL, rising by just 0.9%. While there was a decrease of 0.5% below £1m, there was a rise of 2.1% between £5m and £10m, reflecting the relatively stronger performance of the market in higher price brackets. Meanwhile, there was an increase of 3% in POL.
Despite the current stable economic backdrop, double-digit inflation has led to successive bank rate hikes and pushed mortgage costs higher.
That said, prices in PCL are expected to outperform most UK markets over the next few years, according to the latest forecast.
The prediction is underpinned by the higher percentage of cash buyers, currency discount for overseas buyers and the fact that prices remain 15% below their last peak in August 2015.
