Property

Coutts London prime property index

Q4 2023

Are we at a turning point for prime London property? Our latest research index gives you an insight into the growth areas of the capital and where buyers might be looking to secure a discount.

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Key stats

8.3%

The average discount achieved by buyers in 2023

80%

Percentage of properties sold at a discount to asking price

0%

House prices stayed static during 2023

Prime Central London house prices increased by 2.4% during Q4 last year because of the positive UK economic environment, with inflation falling more than predicted and interest rate rises put on hold – with market expectations that they’ll come down this year.

Despite this late flurry, prices remained broadly static across prime central London when comparing overall data from 2022 and 2023. The average price in 2022 was £1,425 per square foot, compared with £1,428 in 2023.

Even if interest rates aren’t reduced in line with expectations during 2024, there is still optimism for property markets. In our recent ‘Need to Know Investment Podcast’, dated 16th January 2024, we look back to 2003 – 2007 where property prices rose by 40% despite interest rates averaging over 5%.

An increase in cash buyers

“Unsurprisingly, the biggest change we saw during 2023 compared with previous years was an increase in cash buyers for London properties, with clients reluctant to take out lending due to high and unstable interest rates,” says Coutts Real Estate Investment Director Marc Rister.

“Over the next 12 months we’d expect transaction volumes to increase as interest rates begin to fall, and clients who wanted to purchase property in 2023, but didn’t due to lending costs, make the move in 2024.”

Marc adds, “We’ve also seen a shift towards usage of buying agents through our Real Estate Service as clients look to gain greater access to off-market properties and employ experts to take care of the price negotiations, given the high level of discounts available in the market.”

Are we in a strong or weak property market?

In 2023, 80% of properties were sold at a discount, compared to 74% in 2022. The average discount throughout 2023 per property was 8.3% – the highest level in three years.

After two years of strong property sales, 2023 saw a 17.2% drop compared to the previous year, the largest annual fall in 10+ years. Big contributors to this have been rising interest rates and high inflation, making it more expensive to purchase property, combined with an unwillingness of sellers to sell unless they obtain their desired price.

Mayfair & St James’s was the only area of London that saw an increase in the number of properties sold in 2023 compared to 2022, but the rise was modest at just 4.2%.

Rental market

After at least five years of broad consistency at around 3.7%, rental yields increased to an average of 4.1% in 2022 and to 4.5% in 2023, with the last two quarters demonstrating yields of 4.7% and 4.6%. This highlights the strength of the rental market – something we’ve noticed at Coutts due to a high demand for good London properties and restricted supply.

The most profitable areas to have a rental property are Battersea, Clapham and Wandsworth (5.3% rental yields) and Pimlico, Westminster & Victoria (5.2% yields).

Local insights

Wimbledon, Richmond, Putney & Barnes were the only areas in London where prices beat their previous peak levels (£934 per square foot in Q1 2022), reaching an all-time high of £985 per square foot.

All other areas were below their previous price peaks with the best value in King’s Cross & Islington, Knightsbridge & Belgravia and Mayfair & St James’s. All these areas traded more than 20% lower than peak levels, demonstrating the strength of deals to be had in those markets.

Taking an average of the whole of prime London in Q4 2023, prices remained almost constant at £1,441 per square foot, compared with £1,443 in Q4 2022. The area with the biggest increase was Wimbledon, Richmond, Putney & Barnes, which saw prime property values rise by 14.1%, while Hammersmith and Chiswick property has become 7.3% more expensive.

Average Discount

4.68%

Average gross rental yield

Considering your next move? Let Coutts help

Our real estate team could help you find the perfect property. And our bespoke mortgage service means we could provide a mortgage that’s as unique as you are.

As lending costs reduce, our range of borrowing solutions could help you and your family make your move in 2024. We also provide expert support to our international clients who might be looking to benefit from unique opportunities in prime central London.

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