Confidence is returning to the UK’s prime markets with almost all of them experiencing an easing in price falls over the final quarter of 2023, analysis from Savills has revealed.
The firm’s prime residential index reported that regional house prices fell by 0.8 per cent in Q4, an improvement on the 1.5 per cent seen in Q2 and Q3.
This leaves values down 4.8 per cent year on year and 6.1 per cent down from their Q3 2022 peak.
Savills also found that, in prime central London, values fell by a marginal 0.2 per cent in Q4 2023, an improvement on the 0.5 per cent in Q3.
This market remained “markedly more resilient” with annual falls totaling 0.8 per cent on average, while domestic outer prime London markets closed the year down 1.2 per cent.
Savills residential research director, Frances McDonald, said: “The source of buyers’ funding has become a key determinant in the performance of micro markets.”
“Broadly speaking, the prime markets are less reliant on borrowing than the mainstream and more responsive to sentiment.
“These results point to a market that has all but levelled out, something that could happen in the first few months of 2024, ahead of their mainstream equivalents, unless we see a major shift in policy.”
Mortgage market
Savills also stated that confidence has “creeped” back into mortgage markets as values in the most heavily mortgage-dependent prime suburban and inner commuter markets performed the best in Q4.
These markets slipped by just 0.5 per cent and 0.6 per cent respectively.
While these markets remain the most affected on an annual basis, as they were down by 5.6 per cent for the suburban market and 6.2 per cent for inner commuter, values appear to have rebased quickly in the face of higher borrowing costs but are now holding up best.
Prime central London
Savills also found prime West London was the top performing market in the UK over Q4 with values remaining flat, something which was attributed to a greater alignment between buyer and seller expectations.
Meanwhile, prime central London saw the smallest fall in values in 2023 of 0.8 per cent, something which was underpinned by cash buyers.
As a result of this, this market is expected to be the first off the blocks growth wise in the New Year.
“Cash is continuing to play a pivotal role across prime London, with more than half of Savills agents agreeing that they are seeing the biggest demand from cash buyers,” McDonald added.
“This has resulted in higher value properties - synonymous with cash and equity rich buyers - renaming the most steady on the quarter.”
tom.dunstan@ft.com
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