London returning to dominant role in high-end market, says agency

Savills suggests that London is returning to its role as the dominant element in the high end housing market in the UK.

It says that while annual price growth in the country markets continued to exceed that in the capital, the difference in price growth in the first three months of 2022 narrowed considerably as people returned to office work and many pre-pandemic routines.

Prime Central London recorded its strongest quarterly price growth in eight years as international buyers began to re-enter a stock-constrained market that has been largely dominated by domestic buyers since early 2020. 

PCL prices ticked up 1.1 per cent in the quarter, leaving them 2.8 per cent higher than a year ago. Savills says this was the niche’s most robust performance since the stamp duty changes of 2014.

London’s prime flats and smaller houses began to see more significant price growth for the first time since the first lockdown and more urban locations such as Canary Wharf, Islington and Shoreditch outpaced suburbs further from the centre.

“There is still a strong core of unmet demand at the top end of the market that, for now, remains undeterred by higher costs of debt, rising costs of living and the geo-political uncertainty triggered by the war in Ukraine. Here, equity outweighs debt as a source of funding and much higher levels of disposable income mean buyers have been more insulated against macro-economic pressures” says Frances Clacy, Savills research analyst. 

“At the same time, supply remains well below normal levels in virtually all prime locations creating the conditions for continued price growth.  However, we would expect to see increasing price sensitivity creep into the market over the remainder of the year given the economic backdrop.”

House prices across the UK’s prime town and country locations rose by 2.0 per cent in the first quarter and 9.0 per cent on an annual basis, says the agency. 

The strongest growth was recorded in high value suburban markets such as Esher, Rickmansworth and Weybridge with 2.8 per cent quarterly growth and 10.8 per cent annually “providing increasingly clear evidence of proximity to work being factored into decision making once again” according to Clacy. 

She says: “More widely we’re seeing many regional towns and villages showing stronger quarterly price growth than the purely rural locations, suggesting proximity to local amenities are becoming a more pressing consideration. Cities as far apart as Bristol, Glasgow, Winchester and York are outperforming their surrounds.”