"Returning international buyers can see there has been very little change in prices over the last two to three years and that is driving demand for flats"
The flat is back. Demand for apartments in prime central London (PCL) has risen as overseas buyers return and lockdowns become a distant memory. It’s not surprising when you look at the passenger numbers arriving at Heathrow.
In December, there were 11% fewer arrivals than in the same month in 2019. The equivalent drop in 2021 was 53%.
As a result, the proportion of flat sales in PCL in Q4 2022 was 74%, which was the highest level in three years, Knight Frank and LonRes data shows. The change has benefitted markets where apartments are more prevalent.
The strongest annual price growth in PCL in the year to January 2023 was in South Kensington (+5.5%) followed by Knightsbridge (+4.5%).
Stuart Bailey, head of prime central London sales at Knight Frank, comments: “Returning international buyers can see there has been very little change in prices over the last two to three years and that is driving demand for flats. Buyers are particularly motivated in more central areas and at higher price points.”
In the so-called golden postcodes of Belgravia, Mayfair and Knightsbridge, the number of sales in 2022 was 55.3% higher than in 2020, LonRes and Knight Frank data shows. The increase was 40.8% in the rest of PCL. The highest jump was recorded in Knightsbridge (+70.4%) followed by Marylebone (+66.7%).
Stuart adds: “Prime central London was no different from the rest of the country and activity levels dropped noticeably in the final three months of last year. The feeling I get is that the effect of the mini-Budget has worked its way through the system and there is a healthy balance between supply and demand in most areas that will support the market in PCL this year.”
After starting the year strongly, we expect prices in PCL to outperform the rest of the UK market over the next few years for several reasons, including the normalisation of international travel.
A higher proportion of sales in PCL are in cash, as previously explored here. It means the property market in central London will be more immune from the impact of mortgage rates that are notably higher than they were this time last year.
Another factor to consider is the currency discount. When the price declines and the effect of a weaker pound are taken into account, effective discounts of around 35% to 40% are available compared to July 2014 in PCL.
Average prices in PCL are still 15% below their last peak in August 2015, highlighting the strength of the relative value argument. The decline for flats is -18% and -10% for houses.
The figures compare to an 18% increase in the value of country houses over the same time due to the so-called ‘race for space’ inspired by the pandemic.
No wonder central London apartments are back in demand.
