The prime London sales market burst into life in October after what has been a relatively quiet year.

All activity measures were significantly up, both compared to last year and longer-term averages for the time of year.  Values have been under pressure for a long time and remained lower in October on an annual basis, but the pace of falls has been steadily slowing for over the course of the year, according to LonRes.

Transactions increased by 55.8% in October compared to the same month last year and were 62.8% higher than the 2017-2019 (pre-pandemic average) October average. This is a substantial turnaround compared to the relatively subdued performance over the previous nine months of 2024, and the most sales in any October since 2013.

Monthly Prime Data – October

Source: LonRes                                                                             (Note: all price and rent figures based on £ per sq. ft. values)

It is possible that fears of tax increases (specifically stamp duty and capital gains tax) in the Budget on 30 October caused buyers to bring deals forward, but the number of properties going under offer suggests that buyer confidence may be returning in a sustainable fashion.  October saw under offers rise by 21.6% compared to last year, the highest figure for the month since 2015. In the end the Budget did not directly increase either of the aforementioned taxes for individuals buying their main homes (there were rises for additional homes and corporate buyers), so this new momentum could be maintained through the closing months of the year.

Average achieved values across prime London recorded a 0.9% annual fall in October, although this is the best performance since August last year.  Combined with the stronger activity it suggests that a return to price growth could be close. The longer-term context remains that prices have been broadly unchanged over a long period, with average values 0.6% lower than 2017-2019 (pre-pandemic) levels.

On the supply side, new instructions have been relatively high all year and, while October continued this trend, it did not see the same scale of increase as our demand metrics.  There were 18.7% more new instructions across prime London than a year earlier and 12.1% more than the 2017-2019 October average (table 1).  2024 to date has seen larger numbers of price reductions, but these fell in October by 3.6% compared to last year, potentially indicating a small shift in the balance of power from buyers back to vendors.

Stock on the market grew on an annual basis and was 10.6% higher at the end of October compared to last year and 30.5% above the level five years earlier (October 2019).  Broken down by local area, the volume of homes for sale has varied over the past few years.  The increase in available stock over five years ranges from 24% in Fulham & Earls Court to 55% in Mayfair & St James’s.  This is a complete reversal of 2020-2021, when Fulham & Earls Court saw the largest rise and Mayfair & St James’s the smallest.

The top end of the prime London market followed the wider trends with a significant increase in activity in October. Transactions of £5m+ homes across prime London were 34.5% higher than a year earlier and under offers rose by 16.1% over the same period.  Supply has been high and rising for many months and this continued, with new £5m+ instructions increasing by 31.2% compared to last October.  At the end of the month there were 21.7% more properties for sale than a year earlier.

This market has been most affected by concerns around taxation, so we have analysed performance from July to October this year – the period from the election to the budget – to review any impact on activity. Relative to the 2017-2019 average, new £5m+ instructions in July to October this year were up 82%, under offers were up 47%, and sales were up 59%. The comparison over this timescale suggests both supply and demand have grown similarly, the market has expanded in a balanced way. However, relative to the strong market of 2022 and 2023, there is less balance. New £5m+ instructions over the past four months were up 33% on this basis, while under offers were down 3%, and sales were down 11%

In short, the lettings market across prime London is in line with where it was at the same point last year.  Average rents are 35.4% above their 2017-2019 (pre-pandemic) average, but in October annual rental growth slowed to 1.4%.

There were 10.9% fewer lets agreed in October than a year earlier, but year-to-date lettings activity is around 4% ahead of where it was at the same point in 2023. Similarly, new letting instructions in October were 6.5% lower than a year earlier, but the year-to-date figure is up 3.8%.

The stock of available homes to let is recovering steadily but remains a long way off pre-pandemic levels.  For prime London across all price points the number of properties available to let were 0.8% higher at the end of October than a year earlier, but 44.4% lower than five years ago.  Broken down by price band, availability at lower rental values has started to increase but it has a lot further to go compared to the top end of the prime lettings market.

Below £750 per week, availability was 2.7% higher at the end of October than a year earlier but it remains almost 70% below where it was five years ago. Above £2,000 per week the recovery to pre-pandemic levels is almost complete – available stock is within 8% of where it was five years ago and is still rising on an annual basis.

Nick Gregori, head of research, LonRes, said: “October saw a significant increase in sales activity in prime London. Set against a backdrop of concern around the first Labour Budget and a subdued year so far for transactions, at first glance this may appear a surprise development.  But there are a few factors that explain why the market has suddenly picked up.

“We have consistently noted that underlying buyer demand has remained relatively robust this year even if not translating into agreed deals.  It seems the catalyst for cautious buyers to move out of the ‘wait-and-see’ phase was the chance to get a deal done before the Budget potentially introduced increased or new taxes for property purchasers.  Volatility of borrowing costs may also have played a role – potentially a case of ‘use it or lose it’ for those with better mortgage offers from a few months back expiring.  But it’s not just deals being brought forward, as under offer numbers also suggest a healthy pipeline of deals to come over the closing weeks of 2024.

“The £5m+ market enjoyed some of this momentum too, with some substantial deals done in the past few weeks.  Supply continues to grow but October saw large increases in both sales and under offers compared to last year.  Looking at activity over the past four months – the first following the change of government – suggests it has fallen back a little from the strong market of 2022 and 2023 but remains well ahead of pre-2020 trends.

“The prime London lettings market is recording slightly higher activity on a year-to-date basis but recent monthly figures have been weaker.  October saw agreed lets and new instructions fall relative to October 2023, the third consecutive month with both metrics decreasing on an annual basis. Annual rental growth fell to 1.4%.”

Via @PropertyIndustryEye