Prime London property: house prices in most expensive areas close to bottoming out

Belgravia in prime central London (Juliet Murphy)
Belgravia in prime central London (Juliet Murphy)

House prices in London’s most expensive areas could be close to rock bottom and set to rise again after a turbulent year.

Buyer confidence is returning and, while prices continue to drop, they are doing so at a slower rate according to the latest research from Savills.

The estate agent found that prime central London price falls had slowed, leaving property values down just 0.8 per cent year on year.

Looking forward it forecast flat prices in 2024 with prices rising by 18.7 per cent by 2028.

Sought-after west London areas including Brook Green and Ealing performed best in the final quarter of 2023, with prices remaining flat rather than falling. This was thanks to sellers pricing in line with buyers’ affordability and expectations, Savills said.

Prime central London, which encompasses areas such as Knightsbridge, Mayfair and Belgravia, saw prices dip by 0.2 per cent in Q4 but saw the smallest annual price falls thanks to the high proportion of cash buyers, with three quarters of homes in the UK’s most expensive area bought without a mortgage.

“The source of buyers’ funding has become a key determinant in the performance of micro markets,” said Frances McDonald, director of Savills research.

“Broadly speaking, the prime markets are less reliant on borrowing than the mainstream and more responsive to sentiment.

“These results point to a market that has all but levelled out, something that could happen in the first few months of 2024, ahead of their mainstream equivalents, unless we see a major shift in policy.

“But, despite increased optimism, with the majority of agents (79 per cent) expecting to see stock increase in the next three months, realistic pricing among sellers will remain vital in propping up prices over the coming months.”

Prime central London is the only area not expected to see house prices fall in 2024, with 3.5 per cent growth anticipated in 2025 as the global economy picks up and political uncertainty in the UK settles after next year’s elections.

“With values still well below historic peaks, prime central London represents a ‘buy,” said Ms McDonald.

“Recovery looks well overdue though at around 19 per cent in the five years to 2028, we expect it to be much less aggressive than in previous cycles given a higher tax environment and greater scrutiny of sources of buyer wealth.”

Suburban and commuter areas

Prime suburban areas such as Northwood and Loughton and pricey commuter areas such as Amersham, Tunbridge Wells and Sevenoaks saw annual price falls of 5.6 per cent and 6.2 per cent respectively.

Buyers in these areas are more likely to buy with large mortgages rather than cash and so struggled to afford higher prices amid the mortgage turmoil at the start of this year.

But the rate of decline slowed significantly towards the end of the year as mortgage rates began to stabilise, signalling the bottom of the market, according to Ms McDonald.

Andrew Perratt, Savills head of UK residential sales, said: “With commuting back in full swing, a sense of pragmatism has returned among buyers, and connectivity is well and truly back up buyers’ wish lists, which has underpinned values in inner city locations.

“On the whole, prime markets are expected to recover quicker than their mainstream equivalents in 2024.

“But with the first cut to Bank base rate not expected until the second half of next year, affordability will remain stretched, leading to continued price sensitivity in some markets, and cash is expected to continue to play a significant role.”