London’s luxury housing market faced a significant slowdown in October, influenced by economic uncertainty that eroded consumer confidence, according to a report from Knight Frank. The average price of prime homes in central London dropped by 1.6% annually in October, with 1.2% of that decline occurring in the last six months. In outer London, average luxury prices saw a similar annual fall of 1.4%, matching the previous month’s decline.
Tom Bill, Head of U.K. Residential Research at Knight Frank, noted that unlike the early months of the COVID-19 pandemic or the period following the mini-budget, there is no single cause for the current slowdown. Various factors have affected sentiment, including higher mortgage rates, the Bank of England’s struggle to contain inflation, uncertainty related to overseas military conflicts, and the impending general election. The mini-budget, introduced in September as a growth plan with tax cuts, was swiftly retracted after receiving nearly universal criticism.
On the other hand, London’s luxury rental market displayed signs of normalisation in October, as indicated by a separate Knight Frank report. Prime central London rents increased by 9.6% in October, while outer London saw rents rise by 8.3%. This marks the first time the annual rate has been in single digits since September 2021. Average rents in both markets remained flat, without a monthly change, for the first time since April 2021.
The report also highlighted a rise in the supply of upscale rental properties, with a 22% annual increase in the number of prime central London rentals priced above £1,000 per week in October. The rental market has experienced unprecedented growth over the last two years, but there are now signs of a slowdown. This more predictable period may provide tenants and landlords with time to make informed plans, according to David Mumby, Head of Prime Central London Lettings at Knight Frank.
