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

As 2022 came to a close the London prime property market continued to grow, counter to the contraction narrative elsewhere, while also revealing opportunities for buyers.

 

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

As 2022 came to a close the London prime property market continued to grow, counter to the contraction narrative elsewhere, while also revealing opportunities for buyers.

Key stats

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 buyers

Prime 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.

Recovery in prices slows as negative sentiment in mainstream market weighs in on prime markets

BUYERS BENEFIT

“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’ market narrative.”  

INTEREST RATES BITE

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.

LOCAL INSIGHTS

  • 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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Pick a postcode: Area-by-area breakdown

Pick a postcode: Area-by-area breakdown

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % of property sold at discount to asking price Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £807 4.8% 164 48.3% -5.6% 149 28.4%
    £1m - £10m £880 -2.4% 149 40.5% -6.8% 42 0.0%
    £10m+ - - - - 0.0% - 0.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % of property sold at a discount to asking price Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £989 0.8% 176 47.1% -7.0% 68 11.5%
    £1m - £10m £1,434 2.5% 147 43.9% -7.9% 57 -20.8%
    £10m+ - - 226 - 0.0% 1 0.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,243 0.6% 200 53.8% -8.9% 52 20.9%
    £1m - £10m £1,707 6.1% 139 39.5% -7.3% 76 -13.6%
    £10m+ £2,979 0.6% 81 37.5% -8.2% 8 60.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £941 8.5% 175 51.5% -7.2% 90 -43.8%
    £1m - £10m £1,091 1.9% 143 39.3% -7.0% 91 -35.9%
    £10m+ - - - - - - -
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £804 0.8% 155 43.5% -5.3% 23 -42.5%
    £1m - £10m £902 -2.0% 134 25.0% -5.8% 40 17.6%
    £10m+ - - - - 0.0% - 0.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £918 -3.0% 174 53.1% -7.3% 32 6.7%
    £1m - £10m £1,289 8.4% 166 34.7% -6.6% 49 -5.8%
    £10m+ £2,048 8.4% 268 33.3% -13.2% 3 -50.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,033 -4.9% 156 51.4% -6.4% 70 18.6%
    £1m - £10m £1,527 -6.0% 130 32.9% -6.9% 82 -21.2%
    £10m+ £2,564 -5.1% 101 33.3% -1.3% 6 -45.5%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £951 8.7% 181 28.6% -3.2% 35 75.0%
    £1m - £10m £1,112 1.1% 113 29.4% -2.9% 17 -48.5%
    £10m+ - - - - 0.0% - 0.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,757 39.4% 67 28.6% -4.0% 7 -22.2%
    £1m - £10m £1,966 -1.6% 158 45.5% -10.2% 44 -25.4%
    £10m+ - - 168 0.0% - 2 -71.4%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,318 13.5% 164 36.8% -5.6% 38 26.7%
    £1m - £10m £1,760 4.6% 159 24.4% -7.2% 78 4.0%
    £10m+ £2,465 - 311 66.7% -15.6% 3 200.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,715 8.0% 134 0.0% -0.8% 3 -25.0%
    £1m - £10m £2,035 -4.1% 186 55.0% -14.0% 20 81.8%
    £10m+ £2,646 -21.9% 101 33.3% -13.3% 6 -33.3%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,079 3.0% 180 54.8% -7.3% 62 87.9%
    £1m - £10m £1,168 1.5% 183 54.3% -10.7% 35 25.0%
    £10m+ - - - - 0.0% - 0.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £1,333 32.9% 172 30.0% -6.6% 10 25.0%
    £1m - £10m £1,870 5.3% 157 52.9% -11.5% 51 34.2%
    £10m+ - - - 0.0% - 1 -75.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £951 0.4% 176 48.6% -7.1% 37 -15.9%
    £1m - £10m £1,497 -1.2% 155 26.9% -7.4% 52 -8.8%
    £10m+ £2,231 -6.1% 121 0.0% -8.2% 5 25.0%
    Source: lonres

  • 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

    Q4 2022
     
    Sold Property Price band Quarterly Average Sales £/Sq Ft Annual Change in price Time on market before sale (days) % OF PROPERTY SOLD AT A DISCOUNT TO ASKING PRICE Average discount for sold stock Quarterly Sales Volumes Annual change in quarterly sales volumes
    <£1m £722 3.5% 173 33.8% -4.7% 74 -1.3%
    £1m - £10m £863 1.4% 126 22.9% -3.9 35 -30.0%
    £10m+ - - - - 0.0% - 0.0%
    Source: lonres

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