Prime London demand resilient but slow to turn into agreed deals. The prime London sales market showed signs of improvement in April, with average achieved prices up on March. Transactions remain subdued when measured only by exchanges, but under offer numbers are improving and other indicators suggest that demand is relatively stable. On the supply side, new instructions continue to rise and available stock is growing steadily. Average values, based on achieved £ per sq ft figures, fell by 2.5% in April on an annual basis, leaving prices approximately in line (+0.1%) with pre-pandemic levels (2017-2019). Average monthly prices have risen twice in a row, suggesting that we may have passed the low point in values for now.
The first quarter of 2024 saw little change in the prime London sales market, with activity remaining subdued and further small falls in average prices. For prime London lettings, rental growth stabilised and activity increased slightly, indicating a more balanced market. Our analysis shows that the clearest trend in the sales market is an increase in available stock. New instructions rose by 4.5% in Q1 on an annual basis, while there were lower levels of agreed sales and properties going under offer. This has resulted in a 9.7% rise in the number of homes for sale at the end of March compared to a year earlier. This trend is stronger in the £5m+ market, with a 26.5% rise, though activity here is also higher. In the lettings market, annual rental growth is still in positive territory at 1.2%, but well down from the 2022 peak of more than 20%. Activity is still constrained by a lack of supply, although this is gradually improving. New letting instructions grew by 14.4% annually in Q1, but this is only just over half the average 2017 – 2019 (pre-pandemic) level.
New instructions up but values and transactions remain subdued.While new instructions were up in February, sales values and activity slipped back. Fall-throughs and withdrawals remain low, but the number of price reductions is growing. In a longer-term context, activity is in-line or slightly ahead of pre-pandemic levels. Transaction volumes in February were 2.7% lower than a year earlier, 0.3% below the 2017-2019 February average. Under offer numbers had been looking more positive but in February they fell by 7.6% on an annual basis, indicating sales activity may remain low in the short term. Values, based on average achieved £ per sq ft figures, fell by 7.8% on an annual basis, leaving them 1.1% below where they were 10 years ago.
There are signs of green shoots in the prime London housing market. January saw a rise in the number of properties going under offer and an increase in the number of new sales instructions coming to the market. Fall-throughs and withdrawals have also fallen. However, this data which is forward looking, is yet to translate into actual sales. As a result, values in January continued to fall slightly month-on-month, with the annual change in achieved prices across prime London falling to -7.1%, the biggest drop in almost five years.
While 2023 was a mixed year for the prime London property market, it could be argued that we start January 2024 in a slightly better place than the January of 12 months ago. While there are some new downsides to consider, chiefly an escalating conflict in the Middle East and a General Election campaign looming, the good news is that inflation has fallen and interest rates are starting to follow, providing a boost to sentiment. However, we ended Q4 2023 on a subdued note with activity levels across both sales and lettings down on Q4 2022.
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