Money Patrons Buoy London Housing Market

London’s luxury real estate market has had a stronger-than-expected start to 2023 with prices stable and signs of strong demand. 

The average price of a home in the U.K. capital rose 2.1% annually in February for properties priced between £5 million and £10 million (US$6.03 million and US$12.06 million), “reflecting the relatively stronger performance of the market in higher price brackets,” according to a Knight Frank report released on Tuesday in the U.K.  

At the same time, the average price of a home in that range in prime outer London was up 4.4% in the same time period, the data showed. 

“Nerves have settled and the aftershock of the mini-budget is dissipating,” Rory Penn, head of London sales at Knight Frank, said in the report, referencing a short-lived economic proposal in the U.K. last year. “However, the true test of strength across all price points will be the spring market.” 

Cash buyers have buoyed luxury home sales in London so far this year. 

Around half of sales in prime central London were in cash, and the number of sales above £2 million was 66% above the five-year average in January, according to Knight Frank. In addition, the number of new prospective buyers rose 52% for those looking for residences above £2 million.

Meanwhile, luxury rental demand has softened, but prices remain elevated, according to a separate Knight Frank report out Tuesday in the U.K.. Rents are 26% higher in prime central London than before the pandemic, and about 23% higher in prime outer London, the data showed. 

Year over year, average rents rose 18% in February in prime central London and 15.6% in prime outer London, according to the report. 

“The strength of the sales market since Christmas has taken most people by surprise,” Gary Hall, head of lettings at Knight Frank, said in the report. “It means the flow of stock we had started to see come across to the lettings market in some areas has slowed down. This will keep supply tight and maintain upwards pressure on rents in the short-term.”