Prime Housing Market - Confidence creeps back into mortgaged sector

High end estate agency Savills has issued an update on prime markets in and around London and south east England.

And it says values in the most heavily mortgage-dependent prime suburban areas - including the likes Northwood and Loughton as well as commuter markets such as Amersham, Tunbridge Wells and Sevenoaks - performed the best in Q4, slipping just 0.5 and 0.6 per cent respectively. 

While these markets remain the most affected on an annual basis – down around 6.0 per cent - values appear to have rebased quickly in the face of higher borrowing costs but are now holding up best.

“As mortgage rates begin to stabilise, we have seen some confidence return to the prime markets. Prices over the last three months have fallen at the slowest rate yet in 2023, signalling that we are reaching the bottom of the prime market. In particular those markets which reacted quickest to higher mortgage rates via price corrections are now falling the slowest and are seeing the highest levels of demand” comments Savills research director Frances McDonald.

Andrew Perratt, Savills head of UK residential sales, comments: “With commuting back in full swing, a sense of pragmatism has returned among buyers, and connectivity is well and truly back up buyers’ wish lists, which has underpinned values in inner city locations.

“On the whole, prime markets are expected to recover quicker than their mainstream equivalents in 2024. But with the first cut to Bank base rate not expected until the second half of next year, affordability will remain stretched, leading to continued price sensitivity in some markets, and cash is expected to continue to play a significant role.”

Scotland was later to respond to downwards pressure and is the only prime market to experience a further acceleration in price falls in Q4 although values are down just 0.8 per cent annually.

In terms of the outlook for 2024, Savills says prime central London is the only market not forecast to experience a dip in values in the coming year.

Price growth of 3.5 per cent is expected in 2025 as the global economy picks up more significantly and any domestic political instability that the next general election causes subsides. “With values still well below historic peaks, prime central London represents a ‘buy” continues McDonald.

“Recovery looks well overdue though at around 19 per cent in the five years to 2028, we expect it to be much less aggressive than in previous cycles given a higher tax environment and greater scrutiny of sources of buyer wealth.”

For the prime regional markets, price falls are expected to continue easing and will total 1.5 per cent over 2024 as a whole. The trends seen in 2023 are likely to continue with debt-dependence very much dictating market performance.

She says that means prime markets closest to London, most notably the suburban and commuter hotspots, where a higher proportion of buyers use a mortgage, will see more significant price falls in 2024 and lower five-year price growth than the likes of North England, Scotland and Wales.