Central London property costs dropped nearly 5 per cent within the 12 months to March, the most important annual fall in three and a half years, because the UK’s poor financial outlook and fears of an additional decline within the housing market stopped rich patrons from committing to offers.
The worth of property in prime areas of the capital dropped to £1,261 per sq. foot final month, down from £1,326 a yr earlier — the bottom degree since mid-2021, in accordance with information supplier LonRes, as values continued the decline that started in late 2022 after a buoyant 18 months.
“The steam has come out of the market. It was a bit inflated final yr,” mentioned Anthony Payne, managing director at LonRes.
Property values in high-end areas of the town, resembling Mayfair and Kensington, are usually much less vulnerable to the current rise in mortgage prices because the market depends on cash-rich overseas patrons. However Payne mentioned patrons had change into extra cautious over considerations that costs may nonetheless fall additional as the results of a mixture of things, together with considerations over the financial outlook and rising rates of interest.
The discretionary nature of the central London markets has meant patrons and sellers can afford to stay in a stand-off, Payne added. Rich patrons with a number of properties are beneath much less stress to make a purchase order, whereas sellers are sometimes in a greater place to attend out the downturn.
“The distributors are nonetheless in yesteryear,” Payne mentioned, including: “We’re simply in that void in the meanwhile the place the 2 aren’t assembly.”
Transaction numbers in March had been down by a fifth on the identical month final yr, whereas costs per sq. foot dipped under the three yr pre-pandemic common for the primary time in almost two years, in accordance with the info.
“Throughout the market, I hear that quite a lot of brokers are quieter,” mentioned James Forbes, director at high-end London property company Forbes Gilbert-Inexperienced. “My longer-term concern could be: can we keep our place as a worldwide monetary centre? The priority for all of us in prime central London is ‘model London’ and ‘model UK’ remaining constructive. That drives our market.”
The central London market loved a lift between mid-2021 and autumn final yr, sparked by the easing of Covid-19 journey restriction and overseas patrons profiting from the weak pound and low rates of interest.
The chaos triggered by the “mini” Price range of shortlived prime minister Liz Truss final September marked a turning level as buyers’ confidence within the UK fell sharply and a lot of residence gross sales fell by means of.
“To put money into London you need financial and political stability,” mentioned Richard Donnell, govt director at property search web site Zoopla.
The broader UK housing market has thus far defied predictions that larger mortgage prices may knock 10 per cent off home costs, with comparatively small declines registered in current months.