LONDON STAYS STRONG

with Frances McDonald, Savills Research Analyst

£5m-plus sales bounce back in the capital

The top end of the market has had a strong start to the year with a total 240 properties worth in excess of £5 million changing hands in the first six months of 2023 - a third of those transactions taking place in the golden postcodes of Chelsea, Kensington and Belgravia.

While this marks a fall of 21% compared to first half year sales in 2022, it is on par with the same period in 2021 and 45% above the first half year average of just 166 for the three years (2017-19) pre-pandemic.

The first quarter marked a slowdown after an intense period of activity from mid2021 as buyers refocused on city life. However, a backdrop of unsettling domestic and international economic indicators has meant that even the cash-driven very top end of the market is price sensitive, particularly given its discretionary nature. Momentum will only be maintained if buyers and sellers remain aligned in their expectations.

There’s also been a notable shift in the mix of properties selling. Apartments continue to account for a growing share of sales as pandemic memories fade, accounting for 44% of

£5 million-plus transactions across London year to date - partly a reflection of the number of world class new build schemes that are redrawing the prime map of London and the shift away from a time when larger homes with private outdoor space topped every buyer’s wish list.

Prime market resilience

Prime central London has held up better than outer prime London, indicating a growing divergence between cash and equity rich buyers and other groups in their ability to transact, and between the very top end of the market and lower value segments.

Prices across London fell by a marginal -0.2% on the quarter, and -1.0% on the year, according to the Q2 Savills prime London index, leaving values 3.9% above their pre-pandemic level.

Cash buyers who are not exposed to concerns around rising interest rates, understandably dominated demand in the second quarter. In fact, year to date, cash buyers have accounted for 71%

Heathfield Gardens

Wandsworth, SW18 �PJ

5 Bedroom | 3 Bathroom | 3,581 sqft

An immaculately presented, fabulous five bedroom Georgian house, benefitting from an abundance of natural light and a South West-facing garden, with sensational views and access to Wandsworth Common, from both the front and the rear of the property.

Guide Price

£3,500,000 of prime central London deals and 35% in outer prime London, according to Savills records.

While London’s prime market continues to perform more strongly than expected, the most recent interest rate rises are likely to squeeze buyer budgets and increase price sensitivity, particularly in the more domestic outer prime locations where more buyers are dependent on borrowing. Sellers will need to price pragmatically to align with prevailing buyer expectations.

Mayfair (+1.1%), Westminster (+0.4%) and Marylebone (+0.2%), popular with pied-a-terre and international buyers were some of the strongest performers on the quarter. More domestic markets such as Richmond (-0.9%) and Holland Park (-1.0%) that outperformed during the pandemic have seen value falls over the first half of the year.

What remains the common denominator across both the prime and super prime markets is that best in class properties are continuing to fare best in more fragile market conditions. In fact, according to Savills latest index, properties considered in immaculate condition across prime central London command an average price of more than £2,000/ sq ft, 37% higher than those considered to be in a poor condition, compared to a premium of 25% around 10 years ago.

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