London Property Market Shows Resilience in Q2 2023: A Coutts Report

London's prime property market has demonstrated remarkable resilience in the second quarter of 2023, with steady price growth and increased sales volumes, according to a recent report by Coutts. The report reveals that prime London property prices experienced a 2.8% increase in Q2, resulting in an annual price growth of 2.6%. While prices are now just 4.9% below the market's peak, the year started relatively sluggishly. However, sales volumes picked up as expected and surged by 28.8% in Q2 compared to the beginning of the year. Nonetheless, sales volumes are still down by 9.8% when compared to the same period last year.One notable trend in the market is the increased availability of properties for sale, which rose by 5.7% compared to last year. However, new listings have declined by 8.0%, posing a challenge for prospective buyers who have been searching for a property without much success.
Rental yields have also shown steady improvement, rising to a robust 4.3% over the past 12 months. This comes after a turbulent period during the pandemic, where yields fluctuated between 3.5% and 3.9%. An intriguing development in the London property market is the surge in the number of deals under offer (according to LonRes), which currently stands at 917 the highest figure seen in over a decade. The reason behind this increase is the extended timeframe between offers being accepted and contracts being exchanged. The average deal time has lengthened from 87 days in the period from 2015 to 2019, to 94 days by the end of 2021, and now stands at 116 days in Q2 2023. This delay can be attributed to challenges in obtaining mortgages due to fluctuating interest rates and conveyancing delays resulting from increased due diligence and local authority searches. Additionally, buyers are facing difficulties in selling their current properties before acquiring new ones.
Buyers in the prime London market are currently negotiating an average discount of 7.7%, slightly down from the previous quarter's figure of 8.6%, but still higher than the same period in 2022 when discounts were at 5.5%. Around 38.1% of listings (according to LonRes) have seen price reductions from their original asking price, indicating a more competitive market in Q2 compared to the quieter Q1. Sellers seem willing to accept lower prices to secure deals rather than holding out for higher profits.
The Coutts report also provides insights into the areas that have witnessed the most significant price fluctuations in terms of pounds per square foot (SF). Hampstead and Highgate have experienced an all-time high in prices, reaching £1,370 SF with a quarter-on-quarter growth of 9.8%. Additionally, these areas have seen prices surge by 7.8% in the last year, representing the highest annual growth across the index. Meanwhile, Knightsbridge Belgravia, though the second most expensive area in London, still remains 16.1% below the peak of the market. Similarly, South Kensington's prices are 18.9% below their peak. Buyers in Mayfair and St. James's are negotiating significant discounts, averaging 14.3% this quarter, almost double the average across prime London markets. However, despite this, Mayfair St. James's, along with Marylebone, Fitzrovia Soho, and Battersea, Clapham Wandsworth, have all witnessed growth in the number of properties sold, with increases of 55.6%, 51.4%, and 50.0%, respectively, compared to Q2 2022.

Overall, the London property market is displaying notable resilience in the face of challenges, making it an attractive option for both buyers and sellers alike.
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