Prime London house prices languish at decade low as wealthy turn to renting

Prime property prices in the capital have remained at 2014 levels, according to new data, while the market’s rental segment sees a boost.

Figures from property consultancy Lonres showed up-market house prices in the city were 3.2 per cent lower than the pre-pandemic average after dropping 7.8 per cent year-on-year in February.

Transaction volumes were also down 2.7 per cent year-on-year, while the number of properties under offer dropped 7.6 per cent.

London’s stock of prime property is steadily growing, with instructions for agents to sell or let properties rising one per cent year-on-year last month and being 20 per cent higher than the pre-pandemic average.

At the end of last month there, were 7.5 per cent more properties for sale than a year earlier and 25.9 per cent more than February 2020 – immediately before the Covid-19 pandemic hit.

In contrast, there were 48.1 per cent more properties available to let, albeit down 25.3 per cent from February 2020.

Renting has become increasingly popular among wealthy Londoners amid higher interest rates and a tough tax environment.

Lonres said annual rental growth appeared to have stabilised at around 3.5 per cent after a few months of falls.

The firm highlighted a boost in property sales within the £5m+ market, up 4.2 per cent in February and 25 per cent higher than the pre-pandemic average. Supply of these homes is also on the rise, with 26 per cent more £5m+ properties for sale at the end of February than a year ago.

Nick Gregori, head of research at Lonres, said: “Agents are telling us they are busy, and while we are recording deals being agreed, there seems to be slow progress from offer to exchange which means actual transaction figures remain muted.”

He added: “The Budget on 6 March saw some relatively minor tweaks to property taxation – on holiday lets, multiple dwellings relief, and capital gains – plus the abolition of ‘non-dom’ status.

“This came too late to impact our February data so we will have to wait and see if there is any immediate impact, but it seems unlikely that the sum total of the changes will shift the dial for either supply or demand in the prime London property market.”