Price growth in high-value prime areas has come to a temporary halt amidst uncertainties surrounding the General Election, according to the most recent analysis by Savills. The market’s cautious stance is evident despite ongoing activity, with potential buyers in prime markets opting to delay decisions until after the election outcomes are clear.
Frances McDonald, Director of Research at Savills, commented on the situation, highlighting the prevalent sentiment among buyers. “Given the likelihood of a change in government and the current market dynamics, there’s a notable sense of caution,” she remarked. “Many buyers in prime segments are adopting a wait-and-see approach, preferring to wait until the political landscape settles before committing to significant investments.”
This cautious approach reflects a broader trend in high-end property markets, where buyers, typically more discerning, are closely monitoring political developments before making substantial financial decisions. Savills’ analysis underscores the impact of political uncertainty on buyer sentiment and the temporary pause in price growth across prime real estate sectors.
The condensed lead-up to the general election creates an opportunity for buyer demand to strengthen through the autumn, once uncertainties have largely settled.
In prime central London, property prices have seen a slight decline, decreasing by 0.4% in the quarter and 0.9% annually. This translates to an average decrease of £20,000 in value for properties valued at £5 million over the past three months.
Changes to non-domiciled tax rules are expected to impact prime central London significantly, prompting affected individuals to evaluate their options. However, it’s noteworthy that the majority of buyers in this segment do not hold non-domiciled status. Demand remains resilient among domestic and other international buyers, buoyed by attractive pricing historically and increasing stability in the mortgage market. Some lenders are even beginning to lower rates in anticipation of a base rate cut.
Additionally, there is scant evidence indicating a surge in property listings entering the market, as many impacted by non-domicile changes are expected to maintain their residence in the capital. However, this trend is likely to dampen demand and influence market recovery dynamics, with potential fluctuations in property values as legislative proposals progress.
In other London prime markets driven more by local demand, property values have remained stable, showing minimal change both annually (a slight decrease of 0.1%) and quarterly (a slight increase of 0.1%). These areas, including Fulham, Putney, and Victoria Park, have been bolstered by robust demand for family homes, a relatively steady mortgage environment, and limited inventory. Recent weeks have witnessed several significant transactions in these sought-after locations.
Outside of London, property prices decreased slightly by 0.4% in the last quarter, contributing to an annual decline of 2.7% in overall property values. These areas had experienced robust growth during the housing market surge of 2020 and 2021.
Buyers in these regions have paused their plans as they await announcements regarding potential interest rate cuts and clarity on future school fees. Despite a reduced pool of active buyers, there remains enough committed demand to sustain market activity, according to MacDonald.
Across all regions, urban property markets continue to outperform their rural counterparts as buyers prioritize access to amenities and connectivity over quieter, more rural settings. Prime property values in cities saw a moderate decline of 1.7% year-on-year, while town properties fell by 2.2%. In contrast, villages experienced a sharper decline of 2.9%, and other rural locations saw values drop by 3.2%.
Labour’s proposal to levy VAT on private school fees might lead to increased demand for state and grammar schools, potentially driving up property prices around high-performing state schools, where premium prices are already evident.
