High mortgage rates and a lack of supply may mean the prime property market misses its typical seasonal boost in the run up to Christmas, LonRes has warned.
It comes as the latest LonRes data for August shows transactions were 28.5% lower than the same month last year, and 9.2% below the 2017-2019 pre-pandemic period.
Average achieved sold prices fell by 1% compared to a year earlier, a slower pace of decline than last month, LonRes said.
Average values across prime London are 4.2% above their 2017-2019 average, which LonRes said indicates little change over the past few years.
The property data firm said other indicators suggest this relatively quiet market will continue. New instructions were down 16.5% compared to last August and the number of properties going under offer fell by 17.1% on the same basis.
However, the number of under offers for the year to date is 18.9% above the 2017-19 average, so the wider context suggests that there is still a decent level of demand in the market.
The market for properties priced at £5m or more has been the strongest segment this year, but activity is slowing, LonRes said.Transactions in August were down 31.1% on the same month a year earlier and under offers fell 34.5%. New instructions fell 2.5% after two months with very high levels. All three of these metrics are significantly above their average 2017-19 levels.
The proportion of properties sold at £5m plus after a price reduction in the three months to August was 47%. This is the highest level since early 2019.
Nick Gregori, head of research at LonRes said: “The central London market has been quiet over the summer with agents reporting feedback from clients that there is a feeling that London is not ‘open for business’ compared to other global cities.
“This is particularly relevant to investors and international buyers who still want to buy but have other options. With many sellers in this market discretionary and not needing to move we are not yet seeing much downward pressure on prices. The impact has all been on transactions, which continue to fall.”
For some domestic buyers demand is constrained by the cost of borrowing, Gregori said.
He added: “High – and volatile – mortgage rates are feeding into a sense of caution for those looking to move. On the supply side the potential impact of remortgage increases creating ‘forced’ sellers is not yet evident. Households facing higher repayments are likely to cut back on spending before deciding to go down the route of selling up.”
While activity over the summer has been quiet, Gregori added, comparison to previous years shows it is around typical levels for much of the past decade.
He said: “The post-Covid boom in activity has made the slowdown seem more significant, but it remains to be seen what the last few months of the year will hold. September is typically the start of the autumn selling season for people looking to move by Christmas. But with transactions taking longer to go through a move by Christmas may be off the cards, meaning the usual seasonal activity may not take place this year.”