Until the end of last year, the UK property market was going great guns. Prices were at an all-time high, even despite the fact that a pandemic had been raging for the best part of two years. At the start of 2020, the Bank of England feared that UK house prices could fall by 16 per cent; in actual fact, they went on a growth spree, jumping by almost 10 per cent in 2021 alone.
Then things began to change. War in Ukraine. Brexit fallout. The effects of Covid finally catching up with the economy. Cue a cost of living crisis, inflation, rising interest and mortgage rates… you know the drill all too well. January marks the fourth consecutive month that prices have fallen in London, and experts almost unanimously agree that the cooldown will continue, with one report by The Guardian forecasting drops of between 5 and 12 per cent (for the UK as a whole).
What will happen to the luxury property market?
All of that said, the luxury market is a different beast. Those purchasing prime property are less affected by the cost of living crisis and rising rates; research from Savills suggests that only a third of Prime Central London (PCL) homeowners have debt on their property. This means fewer forced sales and more holding of value. “Luxury, rare assets will always have demand over areas that are more susceptible, outside of prime central London,” says Camilla Dell, Managing Partner and Founder of independent buying agency Black Brick.
Dell forecasts that prices in prime London will drop two per cent this year, which is low, although she stresses that this should be taken with a pinch of salt: “Predicting property values is extremely difficult, particularly in a market like London where different property types and areas all factor hugely in determining how values will perform over time.” Even if the picture is worse than imagined, it may be a case of simply holding out, as inflation is predicted to peak in the middle of the year, meaning that “we should see some light at the end of the tunnel as we enter Q3 2023”.
Is now a good time to sell?
Buyers are hesitant at the moment, says Dell, and will probably “only take the plunge if they feel the deal/discount seems worthwhile”. So, the answer to the question? Only if you’re willing to be pragmatic on price, as “anything that is wildly overpriced probably won’t be considered at the moment”.
That said, demand is highly subject to where a property is located. London is a patchwork of neighbourhoods and many are retaining their value. The market is still active and even competitive for family homes with gardens in the £2-5 million range in suburbs such as Richmond, Wimbledon and Dulwich, for example.
On a more general level, buyers are looking for proximity to transport links, a good local high street and a park, according to Dell. “Post-pandemic, buyers want to feel like they are buying into a community,” she says. A premium is also being placed on properties with air conditioning as summers in London get hotter.
Is now a good time to buy?
If you’re buying in the current climate, you should make sure that your investment is a worthwhile one. Mayfair is always a good choice – a prime address since the 17th century, stock in this one-mile-square grid is in short supply, and demand remains strong. In prime outer London, look to St John’s Wood. Here, current sale prices are up 11 per cent compared to the 2018 peak.
If you want to be smart, Dell also recommends North Kensington, which she says “has been on a quiet ascent”. “Golborne Road Market is a less tourist-flooded and altogether hipper alternative to Portobello Road,” she continues. “Buyers are also cottoning on to the fact that they can get great value for money compared to Notting Hill, less than a mile away.” In W10, property sells for around £1,400 to £1,500 per sq ft; a similar property in Notting Hill could cost anywhere from £4,000 to £5,000 per sq ft.
Acton is another good choice. It has been the subject of considerable investment – including the arrival of super-fast train links to the City and Canary Wharf – and a £1 billion scheme to build homes, offices, shops and restaurants next to the station is in the pipeline. These new arrivals have helped hike house prices in Acton by 59 per cent between 2012 (when work on Crossrail began) and last year.
Finally, consider Herne Hill, says Dell: “It has previously been overshadowed by its neighbours, Brixton and Peckham. But as property prices have swelled, buyers looking for value for money have started to explore Herne Hill. Little wonder that a ripple of young families – the ‘dogs and sprogs’ crowd – have chosen this area.” The most famous of these is Boris and Carrie Johnson, who are reported to have chosen an Edwardian villa on Stradella Road as their post-Downing Street home.
It seems inevitable that prices will fall this year, and we shouldn’t expect more than above-inflationary growth for the next few years. However, the pinch will mainly be felt in the middle market, as opposed to prime London. That said, buyers will be more sluggish, and sellers should therefore be realistic about valuing their property. There are areas, however, that may, if not buck the trend, then outperform. Look for up-and-coming postcodes bolstered by great transport links, proximity to other areas and possession of other coveted features.