Even though the UK is now seeing the steepest slump in property prices since the 2008 financial crisis, London’s luxury residences are managing to defy Britain’s housing market downturn, reported The Business Times.
Fifteen homes in Central London valued at £5 million or higher were registered as sold in the fourth quarter of 2022—which is 63% higher than the pre-pandemic average, according to researcher LonRes. “It’s not surprising, therefore, that it tempted would-be sellers to put their homes onto the market,” said Anthony Payne, managing director at LonRes.
UK Housing Market Poised for Disruption
The UK’s housing market is facing a ‘perfect’ storm as it tries to eke out growth while coping with the surging cost of living, hiking mortgage and inflation rates, and the risk of recession.
The result: rapid cooling in property demand and sales activities leading to a selloff in the UK’s housing market.
Let’s look at how much the British housing market and buyer demand have been impacted by current economic setbacks:
- British home prices slid in December 2022 by the most in 13 years and are predicted to slip by a whopping 20% in 2023 if the UK’s base rate continues to hike, according to The Guardian.
- The Bank of England has been raising the base since the beginning of 2022 as part of its effort to return inflation to its 2% target level. The bank rate has gone up to an annual rate of 4.0% in February 2023—a jump of 0.5% from 3.5% in December 2022.
- On the other hand, surveyors registered a net balance of -47% for new buyer inquiries in January 2023, plunging from -40% in December 2022.
In such a circumstance, analysts have unanimously agreed that the UK’s property market is facing more turbulence this year.
Wealthy Buyers Are Snapping Up London’s Luxury Property
Despite the present economic upset throughout Britain, luxury sales in London are skyrocketing, outshining the UK’s housing market.
But why?
First off, even though the interest rate and mortgage rate have hit an all-time high this year, millionaires and elites are less likely to get affected by the impacts of the increase, as they’re less dependent on borrowing.
Secondly, Britain’s pound continues to tumble sharply against the US dollar, dropping a full cent to around $1.20.
Part of the weakness of the pound sterling is the increase in power of the US dollar which is attracting more international investors and wealthy buyers to flock to London’s priciest homes.
Case in point: In the first half of 2022, overseas buyers purchased 48% of the total luxury home purchases in Prime London—a jump from 13% from 2021.
That said, the demand for luxury property management services offered by agencies like The London Management Company is getting a push, with ultra-high-net-worth buyers investing in upscale properties in Central London.
Offering bespoke services—from maintenance to upkeep and housekeeping—a class-leading agency ensures a client’s luxury property is well-managed, squeaky clean, and always ready for their arrival.
However, in the final quarter of last year, home sale activities decreased in Greater London due to climbing mortgage rates, soaring inflation, and high base rates.
“The final quarter of the year saw a change of direction,” stated the managing director at LonRes. “We’ll be keeping a close eye on how the market unfolds in the months ahead.”
Wrapping Up
Outperforming Britain’s housing market, London’s luxury houses are seeing substantial growth this year.