UK & London sales market update Autumn 2023

Average house prices continue their downward trajectory, with values falling 5.3% in the year to September.

Our quarterly update examines the latest trends in the UK, London, and prime London sales markets. Key highlights:

• UK and London house prices continue to fall
• Average values remain higher than pre-pandemic levels
• There will be continued downward pressure on prices amid rising stock levels and pressure on buyers’ budgets due to increased interest rates

UK market

Average UK house prices were down 5.3% on the year in September, according to Nationwide’s index. For the average priced home, this equates to a fall of £14,000, taking the average value to £257,808. This is still higher than the average home value at the start of the pandemic, which was around £220,000.  

Prices are falling in most areas of the UK, as shown in the map below. Average prices in the North West are down by 3.5% on the year, while in London they are down by 3.8%.

Activity levels are also muted, with mortgage approvals in August falling to the lowest level since the end of last year when activity stalled in the wake of the mini-budget. The Bank of England’s net balance monitor of mortgage lending fell from +55% in Q2 to -55%. Any positive figure indicates that lending is rising, while a negative figure signals a fall.

Yet early indicators of activity from property portals show that buyer interest started to rise again during September, with Zoopla reporting a 12% rise in buyer enquiries during the month. Even so, overall sales volumes will be muted this year, especially where price expectations between sellers and buyers do not meet. There are increasing numbers of properties where asking prices have been discounted, according to Zoopla, primarily in London and the South East, where sellers are reducing their prices by an average of 4.8%.  

London & Prime London market

The rate of price declines in Greater London eased in September, with values down 3.8% on the year, compared to a 4.3% fall in August. Yet values in the capital are set to recede further, as higher mortgage rates put pressure on buyers’ budgets. Stock levels in London are also starting to rise modestly, which will further tip the scales towards buyers in current market conditions.

Property prices are also falling in the prime London market, albeit by a smaller margin. Average prime London values were down 2.1% on the year at the end of September, with a smaller 1.2% decline in prime central London.

Prime residential property in the capital did not rise in value at the same rate as the wider UK market during Covid, and is now more protected against larger falls in pricing. The prime market also has a global appeal, with the weakness of the pound making UK properties attractive to international buyers and investors. While more expensive mortgages are a consideration for many buyers in the prime and wider UK markets, there is also a more significant proportion of cash buyers in the prime markets, meaning that recent rate rises will not have such an impact. However, buyers are conscious that values have recalibrated since the market peak in 2015. For example, average prices for houses in prime central London are down by 12% since 2015, and flats are down by 18%.

Outlook