Knight Frank: Air is (slowly) coming out of the prime property market

The air is slowly coming out of the prime London property market, Knight Frank claims but the agent has said it is remaining calm.

While mortgage costs have spiked and speculation around falling prices has mounted, Tom Bill head of UK residential research for Knight Frank said the impact hasn’t been dramatic.

He said: “The economic mood has darkened but the market is far from grinding to a halt. The number of new prospective buyers in London over the most recent four-week period was 24% above the five-year average.

“The resilience is perhaps no surprise given that around half of sales inside zone 1 are typically in cash. 

“The market will also be supported by greater levels of affluence, the relatively weak pound, depending on your timing and the fact overseas travel is returning to pre-Covid levels.”

Higher price-brackets have proven more robust as activity tends to be less reliant on mortgage debt, Bill said.

He added: “Overall, activity in London is stronger than outside the capital, where there is a less discernible post-pandemic economic bounce.

“However, recent mortgage market volatility is likely to accelerate a price correction in the capital. Sensitivity around asking prices is higher than it was just a month ago and nervousness among lenders is rising.

“That said, there will be a cushioning effect from strong wage growth, record levels of housing equity, amassed lockdown savings, the availability of longer mortgage terms, forbearance from lenders and the popularity of fixed deals in recent years.

“The opposing forces of natural market resilience and rising economic uncertainty means that prices are likely to keep deflating for the rest of this year, but only slowly.”