Coutts Bank, a subsidiary of Natwest, has released a new report suggesting a promising turnaround for London’s prime property market. Despite a challenging start to the year, where property prices in London’s elite sectors saw a 3.9% drop last quarter and were 1.6% lower than the same period last year, Coutts remains optimistic. The report notes that prices are still 9.3% below the peak of 2014, indicating potential room for growth.

High inflation and rising interest rates have been key players in the recent downtrend of property prices. These factors increased borrowing costs, which in turn reduced market demand. Additionally, the COVID-19 pandemic prompted many affluent individuals to leave the city for rural areas, while the geopolitical situation involving Russian oligarchs also influenced the market dynamics, further driving down prices.

However, with inflation expected to subside and interest rates predicted to decrease, the economic conditions appear favorable for a recovery starting this summer.

Increasing Listings and Sales

There’s good news on the horizon as new property listings have risen by 3.7% compared to last year and a significant 31.5% from the previous quarter. This increase in listings is a positive sign that sellers are gaining confidence in the market. Furthermore, properties are selling faster, with the average selling time now at 161 days—the quickest in the past 12 quarters. Nearly 45% of sales saw a reduction in asking prices, but discounts are becoming shallower, now ranging between eight to nine percent, down from 9.2%.

Spotlight on Super Prime Properties

The super prime sector, featuring properties worth over £10 million, is also showing strong performance, with transaction volumes up 9.1% compared to last year. This suggests that the very high-end market remains robust, attracting buyers despite broader market challenges.

Hotspots and Notspots

Kings Cross and Islington

Despite a significant 81% drop in sales volumes compared to last year, property prices in Kings Cross and Islington peaked at £1,278 per square foot, with minimal discounts available.

Hammersmith and Chiswick

Over half of the properties in these areas were sold at discounted prices, with an average negotiation of 4.5% off the asking price.

Mayfair & St James

Recognised as one of London’s most luxurious locales, Mayfair & St James has seen prices drop below £2,000 per square foot for two consecutive quarters, with prices now 18.6% below their peak.

Future Outlook

Katherine O’Shea, the director of Coutts property investment team, expressed confidence in the market’s recovery. “2024 looks set to be a promising year for prime London property, especially in central areas,” she stated. With increased demand and limited supply of top-quality turn-key properties, some areas such as Mayfair and St James appear particularly attractive, offering value relative to historical prices.

However, challenges remain, notably with new planning laws from Westminster Council which could limit the development of super-prime properties. This could introduce a scarcity value to such properties, potentially driving up prices in central London in the coming years.