Agreed sales volumes across prime London picked up compared to April’s figure but in a wider context remain low, the latest analysis of the prime London housing market by LonRes reveals.

The data shows that transactions in May were down 26.7% compared to a year earlier and 6.0% below the 2017-2019 (pre-pandemic) average.  Total sales over the first five months of the year are 23.6% lower than last year and broadly in line with the 2017-2019 average (-0.7%).

It is a more mixed picture for both supply and stock. In May, new instructions across Prime London were 7.9% lower than a year earlier and 0.1% below the 2017-2019 average.  However, the early part of the year saw higher numbers of homes coming to the market and the year-to-date figure is 5.2% up on last year and 12.3% above the 2017-2019 average.

The numbers of sales falling through and properties being withdrawn from sale are in line with recent trends, so overall the stock of homes available for sale is growing very slightly – at the end of May it was 1.3% higher than a year earlier.  The number of properties under offer, a lead indicator, was 20.4% lower than a year earlier, suggesting that sales activity is unlikely to increase significantly over the coming months.

Prices across Prime London remain broadly static.  The average achieved sale price in May was 0.6% down on a year earlier (table 1).  While the average discount to asking price fell sharply to 7.1% and the proportion of properties seeing price reductions before sale also fell, to 45.6%.  All of which suggests that sellers are becoming more realistic on pricing.

While the overall volume of stock on the market is growing slowly, there are variations to be found among the price bands.  There was 32% more stock on the market with an asking price of £5m or more at the end of May compared to the 2017- 2019 average (chart 1).  By contrast there were 5% fewer properties available at £1m to £2m.

The top-end of the sales market cooled again after its strong start to 2023. Stock levels for properties priced at £5m+ is growing while the sales figures for May suggest that demand may be falling slightly.

New instructions at this top-end of the market rose slightly (+2.1%) in May compared to a year earlier, with the current level 47.7% above the 2017-19 May average.  The number of properties going under offer over the month followed a similar pattern.  There was a 28.9% fall on an annual basis but under offers remain high in a longer-term context – 42.1% above the 2017-19 May average level.

The level of transactions in the £5m+ market across Prime London also followed the same trend.  There were 31.0% fewer agreed sales in May compared to a year earlier, although this figure is 13.0% above the May pre-pandemic average (chart 2).

As far as the trental market is concerned, activity in the letting sector in prime London remained low in May, with the number of new lets agreed down by 25.4% compared to a year earlier.  This metric continues to be impacted by limited levels of stock coming to market.

New instructions are 6.3% lower on an annual basis and 47.7% below their pre-pandemic (2017-19 average) level.  A word of caution though, this latter figure may overstate the fall – demand is so strong that many properties are let without needing to be listed.

Rental growth in May was 8.5% on an annual basis, a slight increase on recent months but well below the figures seen last year.  Rental values across Prime London are around 25 to 30% above where they were pre-pandemic.

While demand continues to outstrip supply in general, changes in time on the market suggest higher value properties are becoming slightly slower to let.  Compared to their benchmarks from 2017 to 2019, all value bands were being let much more quickly a year ago  A year on, the more affordable properties continue to let very quickly, while those in the £1000+ per week band have slowed by more than 10%.

Nick Gregori, head of research at LonRes, said: “We’re hearing from agents across prime London that some markets are a little slow and that it can be tricky to get deals over the line.  Where vendors and buyers are motivated and pragmatic, agreement can be found and sales are still happening, just at a slower pace than the past couple of years.

“For those who are less committed to moving, we have seen something of a standoff between sellers looking back at the strong 2021 and 22 market and buyers anticipating a weaker one in the near future.  But our latest data on discounts and price reductions shows this gap in expectations may be starting to close.

“The £5m+ market had looked less susceptible to the general lack of confidence in the wider economy and housing market, but even here we are seeing emerging signs of uncertainty.  Sales are steady, but more stock is coming to market, and increasing numbers of those on the market are being reduced in price.

“The prime London lettings market is broadly unchanged from the start of the year.  Strong demand set against shrinking supply has resulted in continued rental growth, although at a slower pace than last year.  Smaller and more affordable properties remain popular but there are signs that the market at higher price points is weakening slightly, with our May data showing increases in the time to let in the £1,000+ per week market.”