Growth remains but are we heading into a buyers’ market?

3.0%

Annual house price growth for prime London property in 2022

34.7%

…of properties listed have seen a price reduction

7.7%

The average discount achieved by buyersPrime London property prices rose in the last quarter of 2022, despite the fog of negative news articles predicting a drop off. The key variables of rising interest rates and inflation still look set to influence property prices throughout 2023, but the numbers for 2022 indicated ongoing growth up to year end.

Going forward, the prime (£1m+) and super prime (£10m+) markets are expected to perform better than the mainstream (<£1m) market – particularly over the next 12 months. Although, we expect some nuances between different areas within the capital.

High-end property prices increased 0.5% in Q4 bringing annual house price growth for 2022 to 3.0% for prime London property. Although prices across prime London real estate are now, on average, 5.4% below the market peak of 2014, we’ve seen significant variation across the prime postcodes –  with prices in Knightsbridge & Belgravia actually 17.0% below the height of the market.

“Interestingly, the last quarter did see a rise in the number of properties reduced in price from their initial listing, with 34.7% seeing a mark down,” says Coutts real estate Investment service director katherine o’shea.

“This suggests a potential windfall for buyers who saw the average value of a discount rise to 7.7%, up from 5.6% the previous quarter. The buying agents we work with have suggested one reason for this may be that vendors are keen to offload before the Christmas break. However, with price growth slowing into 2023, we could see a shift to a buyers’ mark

Predictably, the rise in interest rates as the Bank of England deals with inflation has had a knock-on effect in market activity as the cost of borrowing rises. Transaction volumes fell 12.2% compared to a year ago and we expect transaction volumes to fall further in 2023. The number of deals currently under offer is also down 12.1% compared to this time last year. This is likely to pull down Q1 2023 transaction volumes too.

The number of available prime properties valued at £1 million or more has remained broadly flat, with a slight drop on the five-year average with properties for sale and new listings down 5% and 6% respectively. How that may impact buyers in 2023 remains to be seen.

Opportunities in Prime Central London

With the recent increase in interest rates, we expect activity to remain strongest in those parts of the market least reliant on mortgage debt, such as prime central London postcodes.

Some of the most prestigious prime central locations are now representing best value relative to historic pricing.

For example, prices in:

• Knightsbridge & Belgravia are 17.0% below the height of the market
• Mayfair & St James’s are 16.6% below the height of the market
• Pimlico, Westminster & Victoria are 15.5% below the height of the market

These markets also tend to have more interest from international buyers. Dollar-denominated buyers have the added impetus due to the strength of the dollar versus the pound.

Headwinds in outer prime London

By contrast we expect activity to slow down in some outer prime markets which typically see more domestic and mortgage-reliant buyers. For context though, some outer prime markets have also experienced significant growth over the last five years – particularly since the pandemic. This means some of these outer prime markets now look expensive relative to historic prices.

For example, prices in:

• King’s Cross & Islington increased 23.5% in the last five years
• St John’s Wood, Regent’s Park & Primrose Hill increased 24.7% since the beginning of the Covid pandemic three years ago
• Hampstead & Highgate increased 22.8% since the beginning of the Covid pandemic

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SW11, SW4, SW18

Battersea, Clapham & Wandsworth

Prices here have cooled in the second half of 2022 with prices now 7.7% below the peak of Q2 2022.

0.0%

Annual sales volume growth

-6.8%

Average Discount

4.9%

Average gross rental yield

W2, W9

Bayswater & Maida vale

As the cheapest corner of Hyde Park, this area has always represented good value for money. Average prices here are currently hitting record levels at £1,434 per sq ft, likely as a result of the Whiteley redevelopment.

-20.8%

Annual sales volume growth

-7.9%

Average Discount

4.4%

Average gross rental yield

SW3, SW10

Chelsea

Property prices in Chelsea are cheap relative to historic prices. Prime property prices are still 11.8% below the height of the market. Chelsea also had the most super prime sales this quarter.

-13.6%

Annual sales volume growth

-7.3%

Average Discount

3.5%

Average gross rental yield

SW6, SW5

Fulham & Earl's court

New listings are 38.7% down on last year which will go some way to support pricing.

-38.4%

Annual sales volume growth

-7.0%

Average Discount

4.3%

Average gross rental yield

W4, W6

Hammersmith & Chiswick

Prices here fell 10.5% in the last quarter, the largest quarterly fall seen across our index.

17.6%

Annual sales volume growth

-5.8%

Average Discount

4.3%

Average gross rental yield

NW3, N2, N6

Hampstead & Highgate

Prices here are still increasing, up 2.1% in the last quarter to a new record average price of £1,289 per sq ft. We expect growth here to slow this year.

-5.8%

Annual sales volume growth

-6.6%

Average Discount

3.6%

Average gross rental yield

W8, W11, W14

Kensington, Notting Hill & Holland Park

Prices here are down 6.0% on last year and are now 6.7% below the height of the market.

-21.2%

Annual sales volume growth

-6.9%

Average Discount

3.6%

Average gross rental yield

N1, N5, N7

King’s Cross & Islington

Prices here have come off 9.5% in the last quarter, but this area has seen significant growth over the last five years, up 23.5%.

-48.5%

Annual sales volume growth

-2.9%

Average Discount

4.0%

Average gross rental yield

SW1W, SW1X

Knightsbridge & Belgravia

This area continues to look cheap relative to historic price levels. Prices are still 17% below the height of the market.

-25.4%

Annual sales volume growth

-10.2%

Average Discount

3.7%

Average gross rental yield

WC1, WC2, W1C, W1H, W1U, W1G, W1D, W1B, W1F, W1T, W1W

Marylebone, Fitzrovia & Soho

Property prices here increased 4.7% in the last quarter meaning prices are now just 2.1% below peak levels.

4.0%

Annual sales volume growth

-7.2%

Average Discount

3.7%

Average gross rental yield

SW1A, SW1Y, W1J, W1K, W1S

Mayfair & St James’s

Buyers here are negotiating the biggest discounts, on average 14.0% off the asking price. However, the majority of these big discounts are in the £1m - £2m price bracket, some of which could arguably be quite compromised.

81.8%

Annual sales volume growth

-14.0%

Average Discount

2.9%

Average gross rental yield

SW1P, SW1V, SW1H, SW1E

Pimlico, Westminster & Victoria

Prices increased a mere 1.5% over the course of 2022, meaning prices are still 15.5% below the height of the market.

25.0%

Annual sales volume growth

-10.7%

Average Discount

5.0%

Average gross rental yield

SW7

South Kensington

This area saw the highest quarterly jump in values, up 12.7% in one single quarter.

34.2%

Annual sales volume growth

-11.5%

Average Discount

3.2%

Average gross rental yield

NW8, NW1, NW1W

St John’s Wood, Regent’s Park & Primrose Hill

Prices have come off 1.9% in the last quarter, but this area has seen significant growth since the pandemic, up 24.7% over the last three years.

-8.8%

Annual sales volume growth

-7.4%

Average Discount

3.7%

Average gross rental yield

SW19, SW13, SW15

Wimbledon, Richmond, Putney & Barnes

This market is still quite competitive, with buyers on average negotiating 3.9% off the asking price. The average discount across prime London markets is 7.7%.

-30.0%

Annual sales volume growth

-3.9%

Average Discount

4.2%

Average gross rental yield