Prime house prices have continued to fall as ongoing domestic and geopolitical uncertainty impact buyer and seller confidence, according to Savills.
The international real estate advisor found that the prime market remained active, with slightly less activity year-on-year. Scotland and the North of England’s prime markets remained the most robust.
Frances McDonald, director of residential research at Savills, commented: “The prime housing market is becoming increasingly cautious. When surveyed, Savills agents agreed that confidence among both prospective buyers and sellers is continuing to soften. Taken before the Makerfield by-election and the prime minister’s resignation but against a backdrop of ongoing uncertainty in the Middle East, this decline in market sentiment has been reflected in further price falls as buyers have tightened their budgets.”
“But at the same time, sellers have also reined in their price expectations, and the increasing alignment in expectations has supported ongoing market activity despite a thinner seam of demand.”
Statistics from TwentyCI show that throughout Q2, net agreed sales were within 95% of last year’s levels for the whole market. For the market above £1million it was 94%, and above £2million, 91%.
In prime Central London, prices fell by 1.7% over the past three months at a similar pace to the price falls seen in the lead-up to last year’s Budget. Values in this prime market now sit at 26.3% below the 2014 peak.
The majority of agents reported that the tax environment is continuing to weigh on international demand, with nearly half saying international demand had reduced in London. While the pace of falls this quarter has picked up across all parts of prime Central London, there is some variation, with areas such as Notting Hill continuing to benefit from needs-based demand for family housing, recording annual price falls of less than 4%, compared to falls of 7% across more fringe central London neighbourhoods such as Westminster and Pimlico.
Despite ongoing mortgage volatility, the more domestic outer prime London markets continue to be more resilient, with prices falling by 1.1% overall during the second quarter of the year. In particular, values in West and South West London have held up well over the past year, falling by just 1.2% and 1.5%, respectively.
Frances McDonald commented: “Best-in-class properties in areas such as Barnes, Clapham and to the east Hackney and Victoria Park still command a premium, especially those which don’t come to market very often. Where there is the opportunity to acquire what could be a once-in-a-generation home, buyers remain motivated and correctly priced properties are going to competitive bidding, with buyers being prepared to pay for something that fulfils all their criteria.”
Across the prime regional markets, values are down by 1.7% in Q2 and 3.8% annually, with prices in the commuter belt markets and top-end country house market most affected.
Savills finds that, in general, needs-based urban markets are outperforming their more rural surrounds as the market here rebalances post Covid, with Edinburgh and Cheltenham among the strongest performers.
Savills survey also shows that almost all agents surveyed said deals were taking longer to progress and specifically a delay in time between offer accepted and exchange.
Frances McDonald concluded: “The time taken for deals to reach exchanges is reflective of the caution in the market, this lack of urgency is the polar opposite of what we experienced during the mini housing market boom, which now seems a distant memory.”
“Given domestic political uncertainty, we expect the prime market to remain price sensitive over the remainder of the year, despite the prospect of less geopolitical uncertainty and a recent tempering of mortgage rates.”
