London’s prime property market

2023 has been an interesting year for the prime central London residential market. Transaction volumes have been down. Knight Frank have reported prime central London sales are down 15 per cent year-on-year, while house price analyst LonRes puts the annual drop across the wider prime London area at almost 30 per cent. The good news is that research published by Savills this month reveals prices falling by a negligible 0.9% over the year.

Black Brick was kept busy with a stream of buyers with very different requirements, from family homes to glamorous modern apartments. By the end of November, the number of homes we have successfully bought for clients was almost 15 per cent higher than for the whole of 2022, demonstrating how buyers are valuing the services of buying agents in tricky markets. One interesting trend has been the surge in the number of buyers paying cash for properties. In 2022, 34 per cent of Black Brick’s deals were cash sales. In 2023 this has almost doubled, to 66 per cent. The pivot to cash has been driven by the increase in interest rates, which has made the utilisation of debt to protect buyers from Inheritance Tax more expensive. Black Brick’s buyers, for whom protection from Inheritance Tax is important, are turning to jumbo life insurance policies to help protect their heirs from massive future tax bills.

One very interesting aspect of the market in 2023 has been the emergence of glamorous residences curated by luxury brands. These have been a huge hit with wealthy buyers who love their mix of style plus five-star service. London has been relatively slow off the mark when it comes to producing branded residences but 2023 brought three standout schemes. Sales at The Old War Office in Westminster (Raffles Hotels & Resorts), the Mandarin Oriental Mayfair on Hanover Square, and The Peninsula Residences, Belgravia (The Hongkong and Shanghai Hotels) have been strong. These success stories should, in the view of our experts, herald the arrival of more branded residences over the next few years, although the lack of suitable building sites may be a challenge for the sector.

One solution would be for these blue-chip brands to start exploring slightly less-than-prime postcodes. The Mandarin Oriental Hotel Group recently unveiled a deal to create a hotel and 70 branded residences on up-and-coming Bankside, and it will be fascinating to see if international buyers will pay Prime Central London prices to live south of the river in a neighbourhood they are unlikely to have heard of.

In our view the outlook for 2024 for this sector will remain much the same. This is in line with the forecast by JLL and Savills who both think prices will flatline during 2024 before starting to climb again in 2025. By 2028 the firms predict cumulative prime central London price growth of around 19 per cent.