The prime London sales market recorded both price and transaction falls in May, but the number of properties going under offer increased, according to research by LonRes.
In lettings, rental growth decreased slightly, but activity levels improved.
House price growth across prime London remained negative on an annual basis, with sales values in May 2.8% lower than a year earlier.
Transactions were also lower than a year earlier, by 14.8%, with the fewest sales in the month of May since 2017 – 2020 excluded due to lockdown.
However, values were broadly in line with 2017-2019 pre-pandemic levels, while activity was lower by 5.8% on the same basis.
The number of properties going under offer increased in May, up 4.1% compared to the same month last year, suggesting that underlying buyer demand remained robust.
New instructions in May rose by 12.1% on an annual basis, 10.8% higher than the 2017-2019 pre-pandemic May average.
The stock of available homes for sale continued to rise, with 12.2% more properties on the market across prime London at the end of May than a year earlier.
The £5m-plus market continued to slow from its post-pandemic peak.
In May, transactions in this price band were down by 20.5% on an annual basis, although activity was 19.2% above the 2017-2019 average.
At the end of May, there were 27.0% more £5m-plus properties for sale than there were a year earlier.
The pace of annual rental growth across prime London fell again in May; growth of 1.1% was the lowest rate since August 2021, but values are still 28.3% above the 2017-2019 average.
LonRes data for May indicated an annual increase of 4.7% in lets agreed and a 4.3% increase in new instructions, but activity on both measures continues to run well below pre-pandemic levels.
Broken down by neighbourhood, there was relatively little difference in the volumes of homes for sale compared with pre-pandemic levels.
Across a selection of key central locations, each had around 30% to 50% more stock on the
market at the end of May than five years earlier.
Fulham and Earls Court recorded the largest build up of stock in the second half of 2020, peaking at +63% compared to May 2019.
Over the same period, the highest value neighbourhoods of Mayfair and St James’s and Knightsbridge and Belgravia experienced much lower growth in the number of properties for sale.
As late as February 2022 there was 13% less stock on the market in Knightsbridge & Belgravia, but since then it has recovered strongly.
Across prime London, 47% of properties that sold between 2017 and 2019 had their asking price reduced before sale; this dropped to 40% in 2022, but in 2024 so far, increased again to 48%.
Most local areas followed a similar pattern, with the lowest rates of reductions in the stronger market of 2022.
However, Mayfair and St James’s bucked this trend, with 2024’s 37% lower than both 2022 and the 2017-2019 figures.
The latest data also showed significant variation between areas in terms of current levels of price reductions, with more than 60% of sold properties in South Kensington being reduced prior to a deal being agreed, compared to 37% in Mayfair & St James’s.
The £5m-plus market was the strongest sector since the second half of 2021 in terms
of activity; while this remains the case, transaction levels have fallen back from the high point reached in 2022.
Rising new instructions have resulted in available stock for sale growing, particularly over the past 12 to 15 months.
Transactions of £5m-plus properties in May were down 20.5% on the same month a year earlier, although this was still 19.2% above the 2017-2019 May average.
The year-to-date figures – a less volatile metric – showed sales more in line with the equivalent period last year, a change of -4.1%.
The longer-term comparison of the year so far with the average of the same months from 2017 to 2019 shows 2024 33.1% ahead.
Other metrics followed a similar trend, but like the wider market it was the figures for new instructions and price reductions that stood out.
New £5m-plus sales instructions in May alone were 51.8% higher than last year, and almost
double the pre-pandemic May average.
The year-to-date figures showed significant increases compared to both last year and pre-pandemic levels; April and May both set new highs for the number of price reductions and, while the market being larger accounted for some of this increase, the proportion of properties that
have been reduced prior to sale has been very high this year.
With sales slowing and new instructions increasing, stock on the market is growing; at the end of May there were 27.0% more £5m-plus properties for sale across prime London than a year earlier, and this was 55.8% higher than at the end of May 2019.
Recovery of the prime London lettings market continued in May, with more supply further easing the pressure on rents.
There were 4.7% more lets agreed in May than a year earlier, although this was 53.3% below the 2017-2019 May average.
For 2024 to date, lettings activity was around 10% ahead of the same point last year, with
higher supply unlocking more agreed deals.
New instructions in May were 4.3% higher than a year ago but 47.7% lower than their 2017-2019 average.
Across prime London there were 20.3% more properties available to let at the end of May than a year earlier.
Annual rental growth across prime London slowed again in May, but remained in positive territory at 1.1% – the lowest rate since August 2021 – but average rental values are still 28.3% above their 2017-2019 level.
The premium gap between houses and flats grew in the second half of 2020, in response to lockdown and the associated ‘race for space’.
By October 2021, houses had seen rental growth of more than 10% compared to their January 2020 level; in contrast, one and two-bedroom flats were below their January 2020 level at this point.
Values for larger flats were more volatile – three-bedroom-plus flat values were 31.4% above their January 2020 level, higher than houses at 29.0% and around 10% more growth than smaller flats have seen.
Nick Gregori, head of research at LonRes, said: “May saw more of the same for the prime London sales market, with values broadly static and activity relatively subdued, as has been the case for much of the year.
“Demand for homes is still out there but is tending to be price sensitive.
“Motivated vendors understand this and we are seeing asking prices being reduced in greater numbers than usual.
“The upcoming election dominates the news at the moment but historically the housing market has tended to shrug off any impact from previous votes.
“Some buyers and sellers, including potential ones, remain cautious but this is as much about the economy as politics, waiting for better growth figures and interest rate cuts.
“Little in the manifestos looks likely to have a major impact on the prime London market, with policies aimed more at renters and prospective first-time buyers across the country.
“Labour have promised a further increase in stamp duty for international buyers, but similar changes in the past have tended to be absorbed by the market.
“Already announced policies include changes to the rules for ‘non doms’ and further regulation of the private rented sector.
“There is little sign yet of widespread impact from these, though of course these may take time to really impact behaviour.
“The main story in both the core and £5m+ markets is the level of new supply and price reductions.
“Across prime London for all price points, new instructions in May rose by 12.1% on an annual basis and the stock of homes for sale at the end of May is 12.2% higher than a year earlier.
“The equivalent figures for £5m+ homes are 51.8% more new instructions and 27.0% more properties for sale.
“The prime London lettings market saw rental growth slip to 1.1% annual growth in May.
“While this is the lowest rate since August 2021, average values remain 28.3% above their 2017-2019 (pre-pandemic) level, with larger flats and houses performing better than smaller flats.
“Lettings activity is increasing slowly, up around 10% so far this year compared to 2023.”
