Post-summer slump predicted for prime London property market

Knight Frank is predicting a post-summer slump in the prime London property market.

It comes despite its data for the second quarter of 2022 showing the number of new sales instructions was the third highest figure in a decade while the number of new prospective buyers was the second highest total over the past 10 years.

This resulted in the highest number of offers accepted since 2012 and the third highest number of exchanges.

However, the agent predicts that rising mortgage rates will eventually begin to curb demand, which it said will happen to a greater extent in lower price brackets and domestic-driven markets.

Higher levels of affluence, housing equity and a broader base of international buyers will support demand in prime central London (PCL) even as the cost-of-living squeeze gets tighter, Knight Frank said. 

But it warned that ongoing travel restrictions from areas such as Asia will keep a lid on demand and prices.

For now, the agent claims, the prospect of higher borrowing costs is bringing buyers and sellers forward.

Knight Frank’s research said: “In prime outer London, annual growth reached 5.1% after quarterly growth slowed for the fourth month in a row, underlining how the race for space is calming down.

“In summary, we expect the current strong period of trading to come under pressure after the summer. In PCL, the effect will be less marked depending on how quickly international travel resumes.”

Tom Bill, head of UK residential research at Knight Frank, added: “The combination of pent-up demand from the era of low-supply and a desire to act before mortgage rates rise further explains why trading is so robust at the moment.

“The market is in the sort of sweet spot that doesn’t last forever.”