If last year taught us anything, it’s that you can’t fully predict what lies ahead in the London property market, but the next best thing to whipping out a crystal ball is to consult the experts, who have decades of first-hand knowledge and insight to draw upon. So, as we emerge, bleary-eyed into a new year, are things looking up?
“Sentiment will become more positive in the UK housing market as the economic picture improves,” Neir Gigi, Knight Frank’s head of St. John’s Wood sales assures us, “but there has been no shortage of reasons for buyers and sellers to feel hesitant in recent months. Mortgage rates have tripled in three years, there is uncertainty over where the bank rate will peak, the political temperature is rising ahead of a general election, plus the impact of overseas conflict… Sentiment has been sapped to the extent that the seasonal autumn bounce in the UK housing market was non-existent in 2023. Demand has picked up, but sales volumes remain low compared to recent years. Is this the fabled bottom of the market? It’s probably too early to say but with inflation now under control we should see the Bank of England starting to cut rates in Q2 this year. Even with margins getting thin, lenders are keen to do business in a low-volume market and as mortgage costs fall, a seasonal bounce in the spring is looking more likely.”
For Richard Gutteridge, head of Savills prime central London, there’s every reason to be cautiously optimistic, but we may have to practise a bit of patience, too. “Our forecasts indicate that PCL is expected to see the least downward pressure on prices next year, given much less reliance on mortgage debt and the relative value on offer to wealthy domestic and international buyers,” he says. “Prices are 19 per cent below their 2014 peak and represent relative value. Our forecasts point to a bottoming out of values next year and in 2025, we expect to see price growth of 3.5 per cent, rising to six per cent in 2026 as the global economy picks up more significantly and any domestic political instability that the next general election causes subsides – although the prospect of a general election is expected to push out the timing of a recovery.”
“With inflation now under control we should see the Bank of England starting to cut rates in Q2 this year” Neir Gigi, Knight Frank
Chancellors’ regional director of London Matt Johnson also predicts a slowly but surely trajectory for the London housing market, with more stable times ahead. “Looking into 2024, with the significant drop in the UK’s inflation rate in November 2023, it is likely we have reached the peak base rate level,” he says. “Although this is unlikely to come down in the early part of 2024, it does mean it’s equally unlikely to rise further. Mortgage market competition will mean lenders should begin to compete with lower rates to gain market share, certainly in the first quarter of 2024, whilst they have more to lend. This could encourage would-be buyers to commit. This should also protect prices from the more extreme falls that were predicted as rates first started to rise. However, with the certainty of a general election in 2024, we will see buyers inevitably pause in the lead up to voting, which we have seen historically. Therefore, although I feel prices will be more resilient than the worst-case scenarios that have been stated in the media, transaction numbers will remain lower than previous peak levels. Summing up, similar to last year, 2024 will still be a good time to sell if you price in line with the market, but if you are looking to break a record or to be speculative, you might need to sit tight.”