New analysis of the prime London housing sector by independent property analysts, LonRes, shows that the sales market recorded both price and transaction falls in May.

The data also reveals that the number of properties going under offer increased, suggesting that house price cuts are attracting more purchasers.

Property price growth across prime London remained negative on an annual basis, with sales values in May 2.8% lower than a year earlier. Transactions were also lower than a year earlier, by 14.8%, with the fewest sales in the month of May since 2017 (2020 excluded due to lockdown).  However, values are broadly in line with 2017-2019 (pre-pandemic) levels while activity is lower by 5.8% on the same basis.

The number of properties going under offer increased in May, it was up 4.1% compared to the same month last year.  This suggests that underlying buyer demand remains robust.

New instructions in May rose by 12.1% on an annual basis, which is 10.8% higher than the 2017-2019 (pre-pandemic) May average. The stock of available homes for sale continues to rise, with 12.2% more properties on the market across prime London at the end of May than a year earlier.

The £5m+ market continued to slow from its post-pandemic peak.  In May, transactions in this price band were down by 20.5% on an annual basis, although activity is 19.2% above the 2017-2019 (pre-pandemic) average.  At the end of May there were 27.0% more £5m+ properties for sale than there were a year earlier.

Table 1 – Monthly Prime Data – May

Source: LonRes                                                                                                   (Note: all price and rent figures based on £ per sq. ft. values)

Sales market keeps moving but reductions and new instructions are rising

The May prime London sales market was characterised by growing supply and increasing numbers of price reductions, with demand staying steady. Transaction levels remain lower than last year but other indicators suggest a relatively healthy market – under offers are rising and fall-throughs are down.

Average values, based on achieved £ per sq ft figures, fell by 2.8% in May on an annual basis, leaving prices approximately in line (+0.7%) with pre-pandemic levels. Actual average prices have now risen slightly for three consecutive months, adding to the evidence that prices have bottomed out. Looking longer-term, values are 3.2% below where they were 10 years ago.

Transactions in May fell by 14.8% against the same month last year and were 5.8% below the 2017-2019 (pre-pandemic average) May average. The number of properties going under offer in May was 4.3% higher than a year ago. This builds on strong growth in April and suggests the pipeline of deals is healthy.

While the demand side of the equation looks relatively consistent, more is happening with supply.  New sales instructions were 12.1% higher in May than a year ago – every month this year has been above the 2023 equivalent.  And this is 10.8% above the 2017-2019 May average.  The number of properties withdrawn from the market increased in both April and May, but for the whole year to date is just below last year. 

Overall, we have more new instructions, fewer sales and slightly fewer withdrawals, so stock on the market is growing.  At the end of May there were 12.2% more properties for sale across all of prime London than a year earlier, and this is 26.1% higher than at the end of May 2019 (five years earlier).

Broken down by neighbourhood, there is relatively little difference in current volumes of homes for sale compared to pre-pandemic levels.  Across a selection of key central locations, each had around 30% to 50% more stock on the market at the end of May than five years earlier. 

However, the movements in the intervening years have seen much larger variations.  Fulham & Earls Court recorded the largest build up of stock in the second half of 2020, peaking at +63% compared to May 2019.  Over the same period, the highest value neighbourhoods of Mayfair & St James’s and Knightsbridge & Belgravia experienced much lower growth in the number of properties for sale.  As late as February 2022 there was 13% less stock on the market in Knightsbridge & Belgravia, but since then it has recovered strongly.

As well as new instructions to choose from, price reductions mean that buyers are also likely to see existing homes for sale drop into their budgets.  Across prime London, 47% of properties that sold between 2017 and 2019 had their asking price reduced before sale. This dropped to 40% in 2022 but in 2024 so far has increased again to 48%.  Most local areas have followed a similar pattern, with their lowest rates of reductions in the stronger market of 2022. But Mayfair & St James’s has bucked this trend, with 2024’s 37% lower than both 2022 and the 2017-2019 (pre-pandemic) figures.

 Table 2 – Proportion of Properties Reduced Prior to Sale, Selected Neighbourhoods

Source: LonRes

The latest data also shows significant variation between areas in terms of current levels of price reductions, with more than 60% of sold properties in South Kensington being reduced prior to a deal being agreed, compared to 37% in Mayfair & St James’s. 

£5m+ sales resilient but supply continues to rise

We have reported before that the £5m+ market has been the strongest sector since the second half of 2021 in terms of activity.  While this remains the case, transaction levels have fallen back from the high point reached in 2022.  Rising new instructions have resulted in available stock for sale growing, particularly over the past 12 to 15 months.

Transactions of £5m+ properties in May were down 20.5% on the same month a year earlier, although this is still 19.2% above the 2017-2019 May average.  The year-to-date figures – a less volatile metric – show sales more in line with the equivalent period last year, a change of -4.1%.  The longer-term comparison of the year so far with the average of the same months from 2017 to 2019 shows 2024 33.1% ahead. 

Other metrics follow a similar trend, but like the wider market it is the figures for new instructions and price reductions that stand out.  New £5m+ sales instructions in May alone were 51.8% higher than last year, and almost double the pre-pandemic (2017-2019) May average.  The year-to-date figures show significant increases compared to both last year and pre-pandemic levels.  April and May both set new highs for the number of price reductions and, while the market being larger accounts for some of this increase, the proportion of properties that have been reduced prior to sale has been very high this year.

With sales slowing and new instructions increasing, stock on the market is growing.  At the end of May there were 27.0% more £5m+ properties for sale across prime London than a year earlier, and this is 55.8% higher than at the end of May 2019 (five years earlier).

Meanwhile, in lettings, rental growth decreased slightly but activity levels improved.

The pace of annual rental growth across prime London fell again in May. Growth of 1.1% is the lowest rate since August 2021, but values are still 28.3% above their 2017-2019 (pre-pandemic) average.  

LonRes data for May indicated an annual increase of 4.7% in lets agreed and a 4.3% increase in new instructions (table 1), but activity on both measures continues to run well below pre-pandemic levels. 

Recovery of the prime London lettings market continued in May, with more supply further easing the pressure on rents.  There were 4.7% more lets agreed in May than a year earlier, although this was 53.3% below the 2017-2019 May average.  For 2024 to date, lettings activity is around 10% ahead of the same point last year, with higher supply unlocking more agreed deals.  New instructions in May were 4.3% higher than a year ago but 47.7% lower than their 2017-2019 average.  Across prime London there were 20.3% more properties available to let at the end of May than a year earlier.

Annual rental growth across prime London slowed again in May but remained in positive territory at 1.1%.  This is the lowest rate since August 2021, but average rental values are still 28.3% above their 2017-2019 (pre-pandemic) level. 

Looking in detail at rental growth over the past few years, the premium gap between houses and flats grew in the second half of 2020, in response to lockdown and the associated ‘race for space’. By October 2021 houses had seen rental growth of more than 10% compared to their January 2020 level.  In contrast, one and two bedroom flats were below their January 2020 level at this point.  Values for larger flats are more volatile and they have fared somewhere in between the performance of smaller flats and houses for much of this period.  The latest data shows that 3+ bedroom flat values are 31.4% above their January 2020 level, higher than houses at 29.0% and around 10% more growth than smaller flats have seen.

Nick Gregori, head of research at LonRes, said: “May saw more of the same for the prime London sales market, with values broadly static and activity relatively subdued, as has been the case for much of the year.  Demand for homes is still out there but is tending to be price sensitive. Motivated vendors understand this and we are seeing asking prices being reduced in greater numbers than usual.

“The upcoming election dominates the news at the moment but historically the housing market has tended to shrug off any impact from previous votes.  Some buyers and sellers, including potential ones, remain cautious but this is as much about the economy as politics, waiting for better growth figures and interest rate cuts.

“Little in the manifestos looks likely to have a major impact on the prime London market, with policies aimed more at renters and prospective first-time buyers across the country.  Labour have promised a further increase in stamp duty for international buyers, but similar changes in the past have tended to be absorbed by the market.  Already announced policies include changes to the rules for ‘non doms’ and further regulation of the private rented sector.  There is little sign yet of widespread impact from these, though of course these may take time to really impact behaviour.

“The main story in both the core and £5m-plus markets is the level of new supply and price reductions.  Across prime London for all price points, new instructions in May rose by 12.1% on an annual basis and the stock of homes for sale at the end of May is 12.2% higher than a year earlier. The equivalent figures for £5m-plus homes are 51.8% more new instructions and 27.0% more properties for sale.

“The prime London lettings market saw rental growth slip to 1.1% annual growth in May. While this is the lowest rate since August 2021, average values remain 28.3% above their 2017-2019 (pre-pandemic) level, with larger flats and houses performing better than smaller flats.  Lettings activity is increasing slowly, up around 10% so far this year compared to 2023.”

Competition among buyers falls, placing downwards pressure on house prices