Prime London sales activity remained low in April, with the number of transactions for the  month reaching a record low, excluding the lockdown-affected April 2020, and down almost 35% on a year earlier.

Analysis of the prime London housing market by property analysts LonRes shows that sales taken over the course of the year to date are only 1.4% below the 2017 to 2019 (pre-pandemic) average. In a sentiment-driven market with price falls widely forecast, buyers are clearly playing a waiting game just now.

New instructions in April were up by 8.8% on April last year, taking the year to date rise to 9.2%. The number of properties being withdrawn from sale is well below its longer-term trend level (year to date 16.3% below the 2017-19 pre-pandemic average).

Meanwhile the number of properties under offer, a lead indicator, was 11.7% lower than a year earlier, suggesting that activity is unlikely to increase significantly over the coming months.

Average values across prime London showed a slight fall in April, with an annual change of -0.9%. Prime inner London was the best performing area, recording annual growth for the first time in six months (+3.5%).

Across all Prime London the average discount to asking price rose to 9.1%, the highest in over three and a half years.  Just over half the properties that sold in April (50.2%) saw their asking price reduced (chart 1).

Monthly Prime Data – April 2023:

Source: LonRes

The April results suggest that the stock of homes available to buy will continue to increase over the coming months, and that vendors may be more motivated to sell than previously. If activity levels are to recover from a slow start to the year, this motivation will likely be tested further.

£5m-plus market

While March saw signs of a potential slowdown in the £5m+ market across Prime London, April saw a bounce back.   This top end of the market remains the strongest performing segment, with relative activity stronger than in other price bands (chart 2).

£5m+ sales volumes in April were 26.1% up year-on-year and 58.2% above the April pre-pandemic average (2017-2019 April).  The number of properties going under offer in April also grew, 13.6% up on a year earlier.  This is well above past trends at 63.0% above the 2017-19 April average level.

The growth in supply of homes for sale in this market slowed in April.  New instructions were slightly down (-1.4%) in April compared to a year earlier, although the current level is significantly above historical trends – the number of £5m+ homes currently on the market is the highest in the 10 available years of data.

Rental demand

The rate of annual rental growth remained high in April, at 7.4%, pretty much in line with the past three months and down from the 25%+ seen in summer 2022.  Activity continues to be constrained by low volumes of stock coming to market – the number of new lets agreed was down 26.2% in April compared to April last year.

Lead indicators of activity suggest little change in the near-term, with the number of properties going under offer down by 23.7% on an annual basis, and new instructions 12.2% lower.  Compared to longer-term trends, new lets, new instructions and under offers all remain more than 50% below their pre-pandemic levels.

One sign of slowing demand can be seen in the data for discounts and price reductions. The average discount to asking price reached 2.4% in April, which remains low in a historical context but is down from late last year when properties were achieving above asking price on average. The proportion of homes discounted before being let increased to 25.9%, the highest level since August 2021.

Anthony Payne, MD, LonRes, commented: “As the peak selling season enters its stride, there are continued signs that the wider Prime Lonpon housing market is slowing.  Anecdotally agents are telling us that there is no shortage of buyers and those buyers have money to spend.

“However, the housing market is a sector underpinned by confidence and at the moment sellers are referencing prices of yesteryear, while buyers are looking to a future in which they expect prices to fall.  And there’s a gap between the two, that is causing the market to stall.

“For those vendors who fail to recognise the true value of their home in today’s market, the only path is one that leads to a downward price drift.  Small price reductions that edge towards the true value of a property frequently result in a bigger reduction later down the line.

“Our data shows, new instructions (or properties coming up for sale) are on the rise, which for buyers means more choice.  It’s a competitive marketplace, which for anyone seriously wanting to sell, means competitive pricing.  Buyers have time and indeed are taking the time, to sit it out.

“On the prime London lettings front, strong demand against a backdrop of weak supply continues to rumble on.  Although we are beginning to see early signs that demand is starting to cool. New lets were down in April this year, compared to last, but a shortage of supply has continued to act as a support to prices.”