2023-10-27-莱坊-The_London_Review_Q4_2023_5页_1mb

Residential Review Summary - Q4 2023

Core Content

Knight Frank's Q4 2023 report provides an analysis of the prime London sales and lettings markets, highlighting the impact of economic conditions, interest rates, and shifting demand patterns.

Key Findings

Sales Market

• Demand Trends:

  • The number of new prospective buyers in London increased by 12% between August and September 2023, but this is significantly lower than the previous two years.
  • In calmer political times (pre-2016), the same increase exceeded 40%.
  • Overall, the UK's new prospective buyers were 11% below the five-year average in Q3 2023, while London was 13% above.
  • Transaction volumes in London were 11% higher than the five-year average in September 2023, despite a 9% decline in sales volumes across the UK.

• Price Performance:

  • Prime central London (PCL) saw a 1.7% annual price decline in September 2023, while prime outer London (POL) had a 1.4% decline.
  • The Nationwide House Price Index recorded a -5.4% annual decline, but London's price drops were more modest.
  • Average prices in PCL are still 16% below their 2015 peak, and in POL, they are 8% lower.
  • PCL prices are 2% lower than pre-pandemic levels, contributing to the resilience in transaction volumes.

• Market Outlook:

  • Knight Frank forecasts a 3% decline in both PCL and POL in 2023, slightly less than the UK-wide forecast of 7%.
  • The sales market is expected to stabilize in 2024, with PCL at 0% and POL at 1% growth.
  • From 2025 onwards, both markets are projected to show gradual recovery, with PCL and POL expected to grow by 3% and 2.5%, respectively, in 2025.

Lettings Market

• Rental Value Growth:

  • Annual rental value growth in PCL was 11.2% in September 2023, the lowest in two years.
  • In POL, rental growth was 10%, suggesting it may drop into single digits in Q4 2023.
  • Knight Frank forecasts 8% annual rental growth in both PCL and POL for 2023, with a slowdown expected in 2024 and a return to more normal levels from 2025.

• Supply and Demand:

  • The number of new prospective tenants in prime London postcodes remained flat compared to the five-year average.
  • Listings in PCL were 12% lower in Q3 2023 compared to the five-year average, while there was an 18% decline in listings below £1,000 per week.
  • The number of instructions for lettings properties valued above £1,000 per week increased by 45% from January 2022 to September 2023.
  • Owners of high-value properties are more discretionary and have opted to let them out until sales market trends become clearer.

• Market Imbalance:

  • The imbalance between supply and demand is reducing, which is expected to lead to more stable rental growth from 2024 onwards.
  • In higher-value markets, the time to rent is increasing due to higher supply, while demand remains strong in lower-value properties.

Summary of Key Figures

• 12% increase in new prospective buyers in London between August and September 2023
• 14% increase in exchanges in the capital in Q3 2023 compared to the five-year average
• 7.8 ratio of new prospective buyers to new instructions in September 2023, up from 7.3 a year ago
• -1.7% annual price change in PCL in September 2023
• -1.4% annual price change in POL in September 2023
• 11.2% annual rental growth in PCL in September 2023
• 10% annual rental growth in POL in September 2023
• 45% increase in instructions for lettings properties valued above £1,000 per week from January 2022 to September 2023
• 8% forecast for annual rental growth in both PCL and POL in 2023
• -5.4% annual decline in UK house prices (Nationwide)
• 7% forecast for UK house price decline in 2023, with a recovery expected in 2025

Forecast Summary (2023–2027)

Main Views

• Resilience in London:
  The prime London sales market has shown more resilience than the rest of the UK, partly due to lower price levels and the continued presence of cash buyers.

• Rental Market Slowdown:
  Rental growth in prime London has slowed due to rising supply and stable demand, particularly in high-value markets. However, the market is expected to stabilize from 2024.

• Economic Uncertainty:
  The volatile cost of borrowing and eroded sentiment have impacted both sales and rental markets, but London's markets have been less affected than other parts of the UK.

• Long-Term Outlook:
  Knight Frank expects a gradual recovery in both sales and lettings markets from 2025 onwards, with PCL and POL continuing to outperform the rest of the UK.

Conclusion

The prime London property market remains in a holding pattern, with demand and transaction volumes showing resilience despite broader economic challenges. While house prices are expected to decline by 3% in both PCL and POL in 2023, rental growth is projected to remain strong, with an 8% annual increase. The market is at a pivotal point, with a gradual correction in supply and demand expected to lead to more stable growth in the coming years.