Market Focus: London’s property market Spring 2024

As we head into Spring, find out what’s been happening in the London housing market and explore the property trends affecting Hyde Park, Shad Thames and Wapping & Limehouse.

Sentiment in the sales market has improved steadily over the last six months as falling inflation and declines in mortgage rates have brightened the outlook for buyers.

Agents report that more homes are coming to the market, and that buyer demand has risen, and this is mirrored in rising numbers of mortgage approvals shown in official data, although total numbers remain 15% lower than historical norms.

Transaction numbers are also starting to pick up, and are expected to be higher this year than last year.
The swing in sentiment does not mean that the market has switched back to a sellers’ market, however. Agents note that deals are being completed quickly where pricing is most competitive. Average house prices across London were largely flat (-0.8%) in the year to January, according to Zoopla’s price index. Average prime London prices also fell by around 1% last year, although there have been areas of outperformance.

Demand is still strong in the rental market, although activity in this sector has receded from record highs as the gap between supply and demand starts to narrow. After strong rental growth for several years, affordability is starting to act as a constraint on the market – properties priced less competitively are staying on the market for longer with reduced tenant demand.

Some landlords are also reviewing their portfolios, considering an exit from the market. This will mean overall stock levels remain constrained, which will put a floor under rental growth, but indicates that stock levels in the sales market could rise during the year. Those who want to sell should consider the increased competition that may be coming to the market in their area.

Source: Savills Prime London price Index, Q4 2023

Source: Land registry

What’s the latest with UK mortgage rates?

Mortgage rates have been falling since late summer last year as it became clear that the Bank of England’s base rate had peaked at 5.25%. Economists expect three or four rate cuts this year, taking the base rate to around 4.25%, and more rate cuts next year. This expectation of rate cuts pushed down the money market rates which determine fixed-rate mortgage pricing and so rates on home loans have been falling. A 60% LTV mortgage was priced at 4.6% in January this year down from 5.9% in August last year.

This ticked up to 4.7% in February but as inflation continues to fall, further mortgage rate cuts will follow.

What’s happening in Hyde Park?

• £1.3m Average property price W2
• -0.8% Change in average property prices, 2023, prime central London
• -8% Sales volumes 3 months to November 2023, compared to previous quarter, Westminster
• +4.4% Change in prime central London rents, 2023

It was a welcome January confidence boost for the W1 and W2 sales market with a significant increase in new buyer enquiries, although activity slowed towards the end of February as sellers hoped interest rates would further decrease. However, we expect the typical Spring uptick as vendors become more active, while lenders continue to offer more competitive mortgages.

Well-presented houses and lateral apartments, particularly those with outside space and long leases are highly sought-after. Property priced correctly continues to attract strong interest and are going under offer in reasonable timeframes.

Tenant demand across Connaught Village, Bayswater, and Marylebone remains strong and many landlords throughout the local area continue to experience record high rents. Relocation and corporate searches have been on the rise with the amount of stock following suit. So far, economic uncertainty has done little to dampen demand for prime property in this area, yet that’s not to say that it is not vulnerable to these headwinds.
Landlords who ensure their home is kept in good condition and presentable for marketing will reap the rewards in terms of tenant interest and rent achieved.

What’s happening in Shad Thames?

• £735,500 Average property price SE1
• -1% Annual change in property prices, 12m to Jan 2024, Southwark
• +11% Sales volumes 3 months to Nov 2023, compared to previous quarter, Southwark
• +5.7% Annual change in average rents, 2023, Southwark

Sellers in SE1 and SE16 enjoyed a strong start to the year, with our team experiencing a notable uplift in buyer enquiries and 10 properties successfully going under offer in the first quarter. However, it’s only property priced correctly that will attract strong interest and go under offer in reasonable timeframes. As the year progresses, we predict property availability will increase significantly resulting in a more competitive sales market. Therefore, our advice to those looking to sell this year is to act sooner rather than later if they can, to potentially achieve a higher sale price.

Rents in the market remain at an all-time high, underpinned by a chronic shortage of rental properties as landlords look to exit the market due to higher interest and tax rates. As the year continues rental growth in SE1 and SE16 is likely to be become more muted, with the market reaching an affordability ceiling for many tenants searching in the area.

What’s happening in Wapping & Limehouse?

• £645,000 Average property price, E1W
• -4% Change in average property prices, 12m to Jan 2024, Tower Hamlets
• +21% Sales volumes 3 months to Nov 2023, compared to previous quarter, Tower Hamlets
• +5% Change in average rents, 2023, Tower Hamlets

The Wapping & Limehouse housing markets had a positive start to the year with more favourable mortgage rates boosting buyer activity and tight supply keeping rental demand high. Nevertheless, we are still experiencing extreme price sensitivity in both markets, with sensibly priced and well-presented properties generating the most interest and attractive offers.

With numerous tenants renewing their existing rental agreements at competitive rates, landlords with vacant properties who are willing to invest in property improvements or adjust pricing in accordance with
market conditions are more likely to reduce void periods. Rents in the market remain at an all-time high but we expect the coming months’ growth will be more muted as living costs increase and tenants searching in the area reach an affordability ceiling.

Professionals and first-time buyers are often captivated by the charm and tranquillity of the area, along with its excellent links to the City and Canary Wharf, and there is a strong demand for quality one-bedroom and riverfront properties. However, as mortgage renewals continue to stretch homeowner’s financially, we anticipate the sales market becoming more competitive with a significant increase in properties becoming available as the year progresses. Therefore, our advice to those looking to sell this year is to act sooner rather than later if they can, to achieve the best possible price.

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