In Britain’s housing market, average prices are falling – but sales are being boosted

Apr 25, 2023

Britain’s housing market is being propped up by a surprisingly persistent group Average prices are falling – but sales are being boosted

SOURCE: Alexa Phillips  18th April 2023

Price growth stabilises across prime London following a dip at the end of 2022. But realistic pricing will be crucial to maintain momentum and activity this year.

Prime London Price Growth Stabilises

Prime prices remained broadly flat, increasing by 0.1% over the first quarter of 2023
Leaving values at the same level they were a year ago

The prime markets of London have held steady so far in 2023, with average values remaining broadly flat (0.1%) during the first quarter. This compares to the fall of -1.2% experienced in the final three months of 2022 and leaves values at the same level they were a year ago. In central London, annual growth slipped into negative territory (-0.2%) for the first time since March 2021.
There has been some variation by price, with higher-value properties continuing to outperform as they tend to be less impacted by higher interest rates. But this difference in price growth did narrow over Q1, as some stability returned to the mortgage markets. The price of prime London properties worth below £1 million fell marginally by -0.2% in the three months to March, whereas those worth more than £2 million increased by 0.3%. And those at the very top end, over £10 million, increased by 0.2%.
Best-in-class properties also performed strongly. Despite the wider market becoming increasingly price sensitive, many of these properties continue to attract competition. This is further evidenced by our recent buyer and seller survey, which revealed that 22% of London respondents are looking to purchase an immaculate property, and a further 62% want one that only requires some minor refurbishment.

The Outlook

Average prices forecast to fall by -2.0% in prime central and -7.0% across outer prime London
But to recover over the five-year period to 2027

Over the rest of this year, the prime London markets will be less affected by affordability constraints that will impact the wider housing markets.
Across prime central London, which is typically driven by global wealth generation and equity rather than debt, there has been a recent uptick in cash buyers, as mortgage rates have increased. The proportion of those buying with cash increased from 66% between January 2021 and August 2022 to 74% in the six months post-mini budget.
But, given a change in sentiment, central London will not be immune to wider economic and market pressures. As such, we are forecasting values to fall by -2.0% by the end of 2023. We also expect central London to be the strongest performing region over the next five years, with total growth of 13.5%. This will be underpinned by the value on offer and a lack of supply compounded by fewer new build alternatives.
Across outer prime London, higher costs of debt will undoubtedly have a more significant impact, as evidenced by the performance over the past six months. As such, we are forecasting that prime prices will fall by an average of -7.0% by the end of 2023. Longer term, as the Bank base rate gradually falls and mortgage costs continue to improve, we expect values across outer prime London to rise by an average of 6.1% over the five-year period to 2027.
Source: Savills UK | Prime London house prices – Q1 2023

Source: Savills UK | Prime London house prices – Q1 2023