Prime buyers ‘hesitating’ until rates drop

A lack of urgency among buyers is hitting the higher value property markets, new research suggests.

Analysis of prime London activity by Knight Frank says buyers are benefiting from increased supply, meaning they are taking their time on purchasing decisions.

The number of sales instructions in London was 17% above the five-year average in the first quarter of 2024, the agent said.

The number of new prospective buyers between £750,000 and £2m was 21% above the five-year in the first three months of year, Knight Frank data shows. 

Above £5m, the increase was just 3%. Meanwhile, the total number of offers made between £750,000 and £2 million was 6% higher, while above £5 million there was a 6% decline.

Overall, average prices in prime central London (PCL) fell 2.4% in the year to March, the same figure as recorded in February. Meanwhile, prices were down by 1.5% in prime outer London (POL) after rising by 0.1% on the previous month.

Tom Bill, head of UK residential research at Knight Frank, said: “The best way to describe the recent performance of the UK property market is ‘ten weeks of recovery followed by ten weeks of drift’. 

“It is a pattern shaped by interest rate expectations, with mortgage costs dipping and rising as signals around inflation have been frustratingly mixed. The result is a lack of urgency among buyers, a fact compounded by rising supply. 

“This mood of circumspection means needs-based buyers are currently playing a bigger role in driving activity. While this has benefitted lower-value markets, where a higher proportion of domestic buyers move for education or employment, there has been more hesitancy in discretionary, higher-value markets. Uncertainty around recent rule changes for individuals with non-dom tax status may have aggravated the situation.

"For overall momentum to grow, a bank rate cut needs to feel much more imminent. After hovering above 4% since the start of February, a five-year swap rate starting with a ‘3’ would provide a boost for lenders and borrowers.

“For now, the evidence from the first quarter of this year only highlights the difference between higher and lower-value markets.”