As the economic headwinds continue to batter the UK, a new report from property consultancy Savills predicts that the prime central London housing market will see little respite in the coming years. According to their analysis, prices for the capital’s most exclusive properties are expected to finally bottom out in 2023, but a meaningful recovery is not anticipated until 2028.
The findings highlight the ongoing challenges facing the luxury end of the London real estate sector. Savills’ researchers forecast that prime central London home values will decline by a further 5% this year, on top of the 3% drop recorded in 2022. This would bring the total peak-to-trough decline to around 15% since the market’s high point in 2014.
“The premium London market has been buffeted by a perfect storm of rising interest rates, the cost-of-living crisis, and ongoing economic uncertainty,” explained Savills’ head of residential research, Lucian Cook. “While we expect prices to stabilise this year, it’s going to be a painfully slow road to recovery for these high-end properties.”
The report notes that demand for prime central London homes remains subdued, with prospective buyers adopting a cautious approach amid the turbulent economic climate. Additionally, the pool of international investors – a crucial driver of the luxury market in recent years – has shrunk significantly due to factors such as the strong US dollar and global geopolitical tensions.
“The allure of London as a safe haven for global capital has undoubtedly waned,” said Cook. “We’re seeing fewer overseas buyers stepping up to the plate, which is weighing heavily on transaction volumes and price growth prospects in the near term.”
Looking ahead, Savills anticipates that the prime central London market will remain essentially flat in 2024 and 2025, with annual price changes of no more than 1% in either direction. A gradual recovery is then expected to take hold, with prices forecast to rise by around 2% per year between 2026 and 2028.
“While the outlook is undoubtedly challenging, we believe that London’s enduring appeal as a global hub will eventually reassert itself,” Cook concluded. “But it’s going to be a slow and steady process, rather than a rapid bounce-back.”
