London’s Luxury Home Sales Market Had a Slow February

Despite starting the year on a positive note, London’s luxury sales market was more hesitant in February, according to a report from Knight Frank on Tuesday.

Prices fell year over year in both prime central London and prime outer London, dropping 2.4% and 1.6%, respectively. 

But the starkest contrast between the first two months of the year was in the number of offers made. In January, offers were up 1%, compared to the five-year average, but February brought a 12% decline in offers compared to the five-year benchmark. Prospective buyers were up 9% from the five-year average, but that was a much smaller increase than the month before.

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The slowdown “reflects the slightly gloomier mood in the second month of the year in relation to the outlook for mortgage rates,” Tom Bill, head of U.K. residential research at Knight Frank, wrote in the report. Mortgage rates began to creep up again in February after rate hikes were halted in September. 

Inventory was 9% higher than the five-year average in February, compared to January’s 5% increase, however, that’s mostly because of a “relatively higher” number of appraisals in January, according to the report. 

As for the rental market, prime central London monthly prices jumped by 6.3%, and while that seems drastic, it’s a fraction of February 2023’s 18% annual increase. In prime outer London, average rents were up 5.5% from a year ago, as the city’s rental market returns to pre-pandemic conditions. 

“Seasonality is returning to the prime London lettings market after three tumultuous years,” Bill wrote. “The pandemic meant the market was initially flooded with stock in 2020 as short-lets were banned under Covid rules. Then, once the sales market ignited due to a stamp duty holiday and the ‘race for space,’ it prompted more landlords to leave the sector because of the growing regulatory and tax burden.”