Savills, one of the biggest estate agents in the UK, has warned of an “acute” drop in house price value in London next year.
A dreaded combination of higher mortgage rates and the cost of living crisis will fuel the price drop, the company said.
The average cost of homes in the outer prime London area are expected to plunge by as much as seven per cent next year, with recovery taking until 2027.
Prime central London properties are expected to be somewhat shielded, falling just two per cent in comparison next year.
“By contrast, London’s prime markets (broadly the top 10 per cent by value), will be cushioned from some of the affordability concerns governing the mainstream markets due to much higher levels of equity and cash buyer numbers,” said Lucian Cook, Savills’ head of residential research.
It spells more trouble for Brits looking to get in on the capital’s rental market, which has suffered under a lack of stock and booming demand post-pandemic. It is good news for landlords, however.
Savills has forecast London rents to swell by another 5.5 per cent in 2023, and by a total of 18.4 per cent over the next five years.
“The rarefied market in central London’s top postcodes continues to look good value in historical terms, particularly when seen in the context of the weaker sterling and strong dollar,” added Frances McDonald, research analyst at Savills.
“A price recovery in this market appears long overdue. This will help shield it from further, more significant price falls, though it increasingly looks like a significantly stronger recovery in prices will not materialise in earnest before 2025, given the global economic backdrop and prospect of a UK general election in 2024.”