Buyers returning to London but market ‘remains fragile’

Demand for residential property remains fragile despite a pause in interest rate rises, Knight Frank claims.

While the number of new prospective buyers in London rose 12% between August and September as this year’s autumn market began, it was half the increase experienced in the previous two years, the agent revealed.

In calmer political times before 2016, the same jump exceeded 40%.

Tom Bill, head of UK residential research said prime London property remains in a holding pattern. It has not experienced the extent of price declines seen across the UK but neither have the capital’s more affluent postcodes been immune from the deteriorating economic sentiment.

Its analysis showed the number of new prospective buyers across the UK was 11% down in the third quarter of this year compared with the five-year average, while the figure for London was up by 13%.

Meanwhile, there was a 14% increase in exchanges in the capital while sales volumes fell by 9% across the country.

Bill added: “The primary reason for this resilience is the fact average prices are still 16% below their last peak in 2015 in prime central London. In prime outer London, they are still 8% down.

“Average prices are also 2% lower than they were before the pandemic in PCL, which helps explain why transaction volumes were 7% higher than the five-year average in September.”

It comes as analysis by Chestertons shows the London agency received 11% more enquiries from buyers and conducted 25% more viewings in September compared with August.

The brand said this suggests that more buyers are returning to the market following the Bank of England’s decision to pause any further rate hikes.

Chestertons’ September data also shows the agency saw 30% more homeowners wanting to put their property on the market compared with August, giving buyers a growing selection of properties to choose from.  

Matt Thompson, head of sales at Chestertons, said: “With interest rates being held at 5.25% for the time being and positive inflation figures, house hunters are feeling more secure about making major financial decisions.

“As a result, many buyers who put their plans to buy on hold amid this year’s economic challenges have resumed their search.”

It comes as both Halifax and Nationwide house price indices have shown more declines in property values.

Thompson added: “Buyers are always looking for a bargain, but in reality, these are few and far between as property prices in London have plateaued rather than dropped significantly over the past year. 

“Although I expect to see more properties coming onto the market, I don’t think it is likely that we will see any drastic price reductions over the next few months.”