October was a bad month for the UK property market and prime London postcodes did not escape unscathed from the uncertainty that followed the mini-Budget.

Data provided by the Knight Frank shows that average property prices fell 0.3% in October in prime central London (PCL), which was the biggest monthly decline since the onset of the pandemic in May 2020. A fall of 0.1% in prime outer London (POL) was the first decline in 30 months.

Mortgage rates spiked as financial markets took fright at the inflationary potential of the previous government’s tax-cutting programme set out on 23 September.

Things have calmed down since new prime minister Rishi Sunak took over after promising more fiscal restraint. The five-year swap rate, which is used to price most UK mortgages, was trading at around 4.3% on Monday morning, down by over 100 basis points from the period that followed the mini-Budget.

Despite higher borrowing costs, the housing market is experiencing a period of relative stability ahead of the autumn statement on 17 November, according to Knight Frank.

The estate agency does not expect a spike in mortgage rates – they could actually fall slightly over the next few months – but tax changes have the potential to negatively impact demand in prime London property markets.

For now, the data points to a robust market in prime London despite the fact buyers, sellers and anyone re-mortgaging took a sharp intake of breath in October, the agency reports.

The number of offers made in London was down by just over a fifth versus the five-year average – excluding 2020 – in October while viewings were down by 12%, Knight Frank data shows.

However, the number of new buyers registering was up by 26% and the number of instructions to sell was 28% higher, which suggests transactions will remain healthy for now.

“Sentiment became more negative in October, but Rishi Sunak has calmed things down,” said Rory Penn, head of London sales at Knight Frank. “Buyers are getting used to the new normal for rates but there is a strong pipeline of activity and on a global stage London’s appeal is undiminished. We therefore do not expect the sort of price declines we saw during the global financial crisis.”

Indeed, a higher proportion of cash buyers means prime markets may be more insulated from the effects of rising rates.

Average prices in PCL rose 2% in the year to October, while the increase was 4.8% in POL.