Cash purchases have surged in London’s prime markets over the last year, according to JLL research.

Using HM Land Registry data, JLL found that 44% of home purchases in the City of Westminster and 49% in Kensington & Chelsea were bought outright in cash in the last 12 months, with the London-wide average at 19%.

The research also found the capital’s housing market is experiencing declining prices for the third consecutive quarter. JLL’s prime central London index shows a 2.1% quarterly decline and a 5.9% drop compared to the same period last year. Prices are now 6.8% lower than their peak in the third quarter of the previous year. 

However, higher-priced properties over £2m are proving more resilient, with only a 0.8% decrease in prices over the past 12 months, while properties under £2m saw a 6.7% fall.

Despite the price decline, sales activity has increased in the second quarter of 2023, showing a 28% rise compared to the slow first quarter. Stock levels have also risen, with 8.3% more properties on the market compared to the same period last year.

In the lettings market, the uncertainty surrounding the sales market has prompted more households to stay in rental properties longer, leading to a surge in renewals. Over half (51%) of JLL deals agreed in Q2 2023 were renewals, up from 45% a year ago. However, new lettings have decreased by 18% compared to the second quarter of last year, and 35% compared to the five-year average.

Rental prices have seen a modest increase of 1.9% this quarter, with a 5.4% rise compared to last year. One-bedroom flats have experienced the highest annual increase at 6.7%, while more expensive properties saw a more modest 2.9% rise.

Despite a slight increase in rental stock levels, they remain 55% lower than pre-pandemic levels seen in Q2 2019. The market continues to be impacted by uncertainties and the overall sentiment surrounding the housing sector.

Marcus Dixon, director of UK residential research at JLL, commented: “The implications of stubborn inflation on the UK mortgage market are hampering activity in prime central London. While fewer buyers are heavily indebted – almost half buy cash – uncertainty surrounding the short-term outlook is impacting prices.

“The lettings market remains competitive, stock levels have improved on their 2022 lows but there are still more prospective tenants than there are properties. This has resulted in further rent increases this quarter, with rents almost 20% higher than they were in 2020.”