Despite the dual economic pressures of sustained high inflation and 12 consecutive Bank of England base rate rises, the capital saw a 2.8 per cent month-on-month rise in prices, according to new data released by Rightmove.
This puts the average London asking price at £696,500, an eye-watering amount for most would-be buyers.
Annually, the price increase was more subdued at 1.1 per cent, but the figures suggest market activity is much higher than expected with properties taking an average of 63 days to sell.
Commentators believe the traditional spring boost to the property market has been delayed this year as buyers slowly return and confidence builds following a tumultuous nine months following the fall-out from the mini-Budget.
“This month’s strong jump in new seller asking prices looks like a belated reaction and a sign of increasing confidence from sellers, as we’d usually see such a big monthly increase earlier in the spring season,” said Rightmove’s Tim Bannister.
“One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely. What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years.
“Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come.”
London’s rising and falling boroughs
Within London, Hackney was the borough with the biggest annual rise in property prices, increasing 5.3 per cent to an average of £724,200.
It was followed by Southwark, with a 4.3 per cent increase to £673,400 and Camden, with an average property price of £1,040,600, a 3.7 per cent annual rise.
The biggest London ‘fallers’ were Merton, where house prices dropped by 2.5 per cent to £718,200, Hillingdon with a decrease of -2.2 per cent to £541,200 and the capital’s most expensive borough, Kensington and Chelsea, where prices reduced 2.2 per cent to £1,660,210.
“The market is still stock-starved and good quality homes in popular areas are still finding buyers quickly. The changed market this year does make valuing homes more of a challenge, as similar properties may be valued slightly differently depending on how popular that specific road or that particular type of property is with buyers,” said Lars Gooch, of Keatons in London.
“Most of the activity we are currently experiencing is with homeowners coming to market for relocation reasons, perhaps trading up their first flat for something bigger or changing location to release some of the capital they have in their current home.”
More confidence among first time buyers and second steppers
The picture for the UK as a whole is similar to London with a 1.8 per cent monthly increase in May, compared to an average May rise of one per cent, and a 1.5 per cent annual price growth. However demand is more nuanced and differs across the price spectrum.
National buyer demand was three per cent up on 2019’s levels for second-stepper properties and six per cent for first-time buyer homes. In contrast, it was one per cent lower than 2019 for top-of-the-ladder homes, suggesting these buyers are hanging back.
This means that agreed sales are just three per cent behind 2019, the last, normal pre-pandemic market, and the discount from final asking price to agreed sale price is 3.1 per cent, again reflecting that confidence has returned to the market and that sellers are being more realistic with their pricing.
Despite the base rate rises, mortgages remain steady and an average five-year fixed, 15 per cent deposit mortgage is now 4.56 per cent, compared to 5.89 per cent last October.
“This month’s record price is a strong indication of sellers’ confidence, and we can see from activity levels and the still relatively limited choice of property for sale that this confidence is justified in some segments of the market,” said Mr Bannister.
“More discretionary sellers at the top-end may be prepared to price high and wait for the right buyer, and whilst it is positive that they appear to feel no financial pressure to sell, the data suggests that some sellers in this sector will need to price more competitively.”