London’s prime property markets are holding up better than mainstream markets in the face of rising interest rates, according to new data from Savills’ Q3 prime market index.
The index shows that prices in prime central London fell by 0.5% in the third quarter of 2023 and 1.2% over the past year.
In contrast, outer prime London areas experienced a slightly greater fall of 0.9% for Q3 and 2.5% annually.
This stands in marked difference to the UK’s mainstream market, which saw a year-on-year decline of 5.3%, as reported by Nationwide.
Frances McDonald, director at Savills residential research, stated: “Prime markets have remained comparatively robust this year but our latest data indicates that prime London is not immune to months of rising rates and a wider economic and political uncertainty.”
The report also touched on the current gap between what buyers are willing to pay and sellers expect to receive.
According to the data, 53% of agents say that buyers are looking to pay between 5% to 10% less for a property, while half of sellers expect to receive 0% to 5% less.
McDonald said: “For all but the very best properties, buyers and sellers are as much as 5% apart on price. Closing this gap will be crucial in maintaining activity levels for the remainder of the year.”
The survey reveals a growing divergence between apartments and houses in London’s prime markets. Houses in North and East London were the only areas to show positive growth of 0.7% annually.
On the other hand, apartment prices have declined across all prime locations in the city. “Sustained demand and short supply has underpinned growth for smaller properties in first-time buyer micro markets,” said McDonald.
Cash transactions are noted as a significant factor, particularly in the £5-10m range in prime central London, where they have a stabilising effect.
McDonald added: “Mortgage borrowing is largely discretionary in the prime central London markets, and so we saw an uptick in borrowing when interest rates were at historic lows during the pandemic. Now these markets are benefiting from affluent buyers’ ability to transact with cash or low loan-to-value ratios as rates have risen.”
