Research from Coutts, a private banking institution serving wealthy clients, reveals significant weakness in London’s luxury property market. Properties in prime central London postcodes including Mayfair, Belgravia, and Knightsbridge are increasingly selling below their asking prices, with eight out of 10 transactions falling short of initial valuations. The market has experienced a 5% price decline in the third quarter of this year, with homes selling at an average 10% discount to asking price.
The downturn reflects broader pressures affecting the highest end of London’s residential market. Prices in these exclusive areas have fallen 14% below their 2014 peak, with some neighborhoods experiencing steeper declines. South Kensington and Belgravia have been particularly affected, with prices 26.9% and 30.8% below their respective peaks. Multiple factors have contributed to the slowdown, including the aftermath of Brexit, the Covid pandemic, increased property taxes, and rising borrowing costs. The abolition of the non-dom tax regime has also reduced interest from international buyers.
Market activity has contracted notably, with new listings declining 14% quarter-over-quarter and available inventory down 6% year-over-year. Transaction volume fell 9.1% in the third quarter, with the largest drop occurring in the £2m-£5m price segment, where deals declined 22.3%. However, activity at the very top of the market remains resilient, with 26 transactions exceeding £10m recorded in the third quarter alone, according to separate research from estate agent Savills.
Market participants are adopting a cautious stance as financing conditions remain challenging. While the Bank of England base rate has remained unchanged since last December, volatility in the bond market has pushed up mortgage pricing. Expectations are growing for a potential rate increase next week, marking the first change in three years. Experts suggest that sellers and buyers at the premium end of the market are likely monitoring economic developments closely before making significant property decisions.
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