Knight Frank: London market is bouncing back

The London property market has started the year better than expected, with sales instructions and buyer demand both rising, according to Knight Frank.

A report from the agency brand shows the number of new prospective buyers registering in the first three weeks of the year was 6% higher than in 2020, during the so-called ‘Boris Bounce’ that followed the December 2019 General Election. 

The only time more new buyers have registered in the equivalent period over the past decade was in 2022, the report said.

Meanwhile, the number of new sales instructions in the third week of the year was the highest figure for a single week in January for a decade

The third week of 2023 also saw the fourth highest number of offers accepted in London during a single week in January in ten years.

Tom Bill, head of UK residential research for Knight Frank said it iss not just a case of buyers keen to act because they are sitting on reasonably-priced mortgages that pre-date September. 

He added: “New demand is also proving resilient.

“Meanwhile, on the supply side, the number of new sales instructions in the third week of the year was the highest figure for a single week in January for a decade. A double-digit price fall does not exactly feel imminent.

“Caveats remain, including the fact the property market shut down early for Christmas due to the mini-Budget. Could this be a short-lived bounce-back? Will more debt-reliant mainstream markets outside of the capital perform in a similar manner?”

He said the resilience of prices and sales volumes will be put to the test in the spring when larger numbers of transactions take place and by which time virtually no five-year fixed-rate mortgages below 4% will remain in circulation.

Bill said: “So far, the evidence is that buyers and sellers have accepted the fact higher mortgage rates are here to stay, and that the Bank of England is now the primary cause, not Kwasi Kwarteng or Liz Truss.

“They key question is: if buyer budgets are adjusting downwards, how far will house prices mirror the decline?

“The answer is still unclear, but price growth in the prime London market was relatively subdued by its own standards during the pandemic, which is also driving activity.”

The analysis also showed average prices in prime central London (PCL) were flat in January, producing an annual increase of 1.2%. In prime outer London (POL), average prices were down by 0.1% from December, resulting in annual growth of 3.6% in the year to January.

Average PCL prices are now 1% below their March 2020 level while in prime outer London (POL), they are 5% higher, Knight Frank said.