JLL: ‘International buyers may save prime markets from housing downturn’

The prime central London (PCL) market may escape a property downturn, JLL claims.

The real estate and agency brand has highlighted the low reliance on debt and high prevalence of international buyers – increasingly helped by the weak pound – as reasons why prime markets may not follow the path of the rest of the UK.

Its analysis found that the drops in the value of Sterling amid the chancellor’s controversial mini Budget last week, has meant those holding dollars or dollar pegged currencies are finding their money will stretch even further. 

Rates prior to the Banks of England’s intervention in late September would mean those buying in dollars would pay 19% less on average for a prime central London property than they would have done a year earlier and almost 38% less than they would have paid at the peak in 2014, JLL said.

Chinese buyers would save almost 10% on prices a year ago and more than 27% on 2014 peak levels, according to JLL.

Its own PCL index recorded house price growth of 1% between the second and third quarter of this year and 1.7% annually.

This has taken average prices to 5.3% higher than their pre-pandemic levels.

More expensive homes saw the highest annual growth, with properties priced at £10m or more rising 3.8% annually compared with growth of 1.2% for homes below £2m. 

The top end of the market continues to record the strong growth compared with pre-pandemic too, with prices of £10m plus homes rising 11.1% compared with 2.4% for homes at sub £2m.

Houses continued to outperform flats, although the gap is narrowing.

Flats in the third quarter of 2022 recorded an annual rise of 1.4% versus growth for houses of 2.8%, 1.4 percentage points difference. 

This compares with a 6.3 percentage point difference at the peak in the fourth quarter of 2021.

Marcus Dixon, director of UK residential research at JLL, said: “Looking ahead it is still too early to assess what impact recent Government policy announcements, and the subsequent reaction from global markets, will have on the housing market.  

“Although with interest rates rising and cost of living pressures far from alleviated, we sense increased downward pressure on both prices and activity in the year ahead. 

“But we don’t think this is necessarily the path the prime markets will follow.  For one, purchasers are far less reliant on debt, meaning the impact of higher mortgage rates are unlikely to bite as deep as in the mainstream market.  Secondly, prime central London attracts a significant number of overseas purchasers, and a weak Sterling exchange rate could lure prospective buyers into the market in the coming months.  For dollar and dollar pegged currencies the case remains particularly compelling.”