The value of prime housing in outer London returned to growth for the first time in nearly two years, thanks to lower mortgage costs, data from an estate agency group found.
The Savills prime sales index for Q3 showed there was a 0.2% growth in outer London, while for the year to September, values went up by 0.9%.
Savills said needs-based domestic buyers in the English capital were “spurred on by a more competitive market”, which resulted in the first annual growth seen since December 2022.
Lucian Cook, head of residential research at Savills, said: “A more competitive mortgage environment, supported by the prospect of further interest rate cuts has continued to support activity across both the prime and mainstream housing markets.
“However, while we would usually expect the top end of the market to be the first to react to improved market conditions, concerns over what the Budget may hold have made buyers more cautious, especially in the most discretionary prime markets.”
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Uncertainty in other prime housing markets
All other regions recorded a drop in values, Savills data showed.
In central London, the value of the prime housing market declined by 0.7% in Q3 and fell by 1.1% in the year to September. Savills attributed this to concerns over market uncertainty and tax changes in the upcoming Budget.
The firm also said values in central London were a fifth lower than their 2014 peak.
Cook said: “Tax concerns, including changes to non-doms tax status, have caused potential buyers in central London to take stock of their situation. However, while there is plenty of anecdotal evidence of people reviewing their tax status, there’s little evidence of this resulting in more stock hitting the market.
“Although there is speculation about what the October Budget may bring, the downside risks in these markets are mitigated by the fact that values remain low in a historic context, and by the enduring appeal of the capital, which will ensure that even those affected are likely to keep a base in prime London neighbourhoods.”
Victoria Park and Hackney were found to be the strongest performing London markets, with rises of 1.2% and 1.8% respectively.
In the regional prime housing market, there was a 0.5% fall in values in Q3 and a 1.7% decrease in the year ending September 2024.
Savills said prime markets outside of London were feeling the impact of the cooling housing market, resulting in “robust” demand for top-end properties in regional cities and towns such as Sevenoaks, York and Edinburgh compared to villages and other rural locations.
This was also evident in the 0.3% rise in values in prime properties in the Midlands, North of England and Scotland, while other prime regional markets saw quarterly declines of 0.5%.
Savills said further mortgage rate reductions would “gradually improve buyer sentiment more broadly” in the future.
According to its figures, the prime country housing market seemed to be more “price sensitive” as values fell by 0.8% in Q3.
While Savills said the decline was not as sharp as the 1.8% drop seen in coastal locations, it contributed to the 5.2% annual fall in this region.
Cook attributed this to “concern over council tax increases and potential greater exposure to capital gains tax”.
He said this meant “pricing in this particular market has come under increased pressure over the past 12 months, although short-term falls are coming off strong growth which occurred during the post-pandemic mini-housing market boom. While demand remains for waterfront homes there is more competition among vendors, meaning that realistic pricing is becoming increasingly important in this market”.
