Prime London price growth hits seven-year high

Buyer demand has rebounded in prime areas of the capital and there is also talk of a return to competitive bidding.

The prime central London (PCL) market has been hit by Brexit and lockdown restrictions, contributing to a lack of international buyers in recent years.

But the latest analysis by Knight Frank shows average prices grew 2.1% annually in March 2022, the strongest rate since May 2015.

The number of new prospective buyers in PCL was 84% higher than the five-year average in the first quarter of this year.

That compared with an increase of 71% across the whole of London and 42% in UK regional markets.

Average prices in PCL are still 16% lower than they were at the start of 2016.

That compares to a 9% decline in prime outer London and a 13% increase in country markets.

The Knight Frank analysis said the key influence on the future performance of the market will be the return of international buyers. 

It said: “Given the current extent of lockdowns in some parts of the world, the return is likely to be more gradual than transformational.

“This suggests stronger price growth will only return next year when overseas demand starts to exert more of an impact."

The opposite is likely to be the case for prices in prime outer London, which Knight Frank expects to peak this year.

Average prices increased by 4.4% in the year to March, which was also the strongest rate of growth since May 2015. 

The research said: “While prime outer areas of the capital continue to benefit from the so-called ‘race for space’, we expect demand to soften as mortgage rates rise and the cost-of-living squeeze intensifies. Rising supply will also increase downwards pressure on prices.”

These sentiments were echoed by consultancy INHOUS,  which helps high net worth individuals buy and sell property.

Its managing director David Johnson, said:  “Since the start of the year, London has very much been back in vogue with both buyers and there’s now an acute supply and demand imbalance. 

“This has led to competitive bidding on properties and driven up pricing.”

The firm highlighted LonRes data showing asking prices have risen 13.8% in Kensington and Chelsea in the year between April 2021 and April 2022.

Johnson said: “This trend is set to continue if more supply doesn’t hit the market in the coming weeks and months. The supply shortage is deterring some would-be sellers from putting their house on the market, with little available and competition for their onward purchase.

“We’re seeing strong activity from both the domestic market and overseas buyers now that travel restrictions have eased for many, so now really is a good time to sell.

“We are working with a number of clients who are planning on upsizing within London as they see themselves living in the capital for many years to come. 

“The pandemic really focused people’s minds on what they want from their space and where they want to live, resulting in higher demand for larger properties with more outside space.

“As such, the family house market is where there is most demand and there’s a lot of pressure as you move up through the market – there is little availability and significant competition for houses above £4m. We are sourcing a lot of property off-market in order to meet this demand.”