Buyers 'returning to London' as offers surpass pre-pandemic levels

London’s prime sales market is set to underperform compared with 2021 but is still looking to be better than the pre-pandemic three-year average, analysis suggests.

Research by property analyst LonRes shows prime London market activity in March 2022 was lower on all measures compared with last year, but it warns that this is distorted by the pandemic and stamp duty holiday.

New instructions were down 12.2% annually in March 2022 while properties under offer were 11.3% lower and transactions have fallen 34.5%.  

While these figures may suggest a weakening market, LonRes says, the underlying trends are more reassuring.

It found that the number of transactions has continued at levels that are 21% higher than those recorded in the three years prior to the pandemic.

The number of homes put under offer in the first quarter of 2022 was just 2.5% lower than the same period last year. 

Additionally, this figure was 41% higher than the average recorded in the three years leading up to the pandemic.

LonRes also predicts that the higher end of the prime London market is set to outperform.

Transactions at the top-end of the market, for £5m plus properties, were 14% higher than last year during the first quarter of 2022 and double the number recorded in 2019. 

Meanwhile, transactions for properties priced at £2m to £5m were similar to last year and 90% higher than 2019 levels.  

However, the number of transactions for properties priced at £1m to £2m were just 48% higher than 2019 levels and 14% below last year’s levels. 

Anthony Payne, managing director of LonRes, says: “As we enter spring, the prime London market is looking strong.  

“While a lack of stock continues to be a problem, it seems buyers are buying.  Properties going under offer – a lead indicator of the health of the market – are now 41% higher than the average recorded in the three years leading up to the pandemic – arguably a more normal period than the stamp duty driven one of the last two years.

“It’s the top-end of the market that continues to outperform.  Properties priced at over £5m are particularly in demand, undoubtedly helped by the continued low cost of borrowing – even taking into account recent and predicted interest rate rises.”

“Anecdotally we’re hearing that buyers – predominantly domestic rather than international – are returning to London’s prime areas.”