By Alexandra Goss.
Why Sentiment — Not Fundamentals — Is Driving Prime London’s Sales Slowdown
2022 was a record year for luxury property sales in the capital: 605 homes sold for £5m or more, the highest annual total since at least 2006, according to Savills. Yet by early 2023, that momentum had all but evaporated. LonRes data shows prime central London sales volumes in the first quarter of 2023 were 29% down on the same period the previous year, while PropCast figures point to falling buyer demand across nearly every part of prime London since the previous summer.
A Standoff, Not a Collapse
Spring is traditionally the busiest season for buying activity in central London, and the market had been hoping for renewed momentum after Easter. Instead, with buyer confidence subdued and many sellers still reluctant to move on price, much of prime London has settled into something closer to a standoff than a straightforward downturn.
We think it’s important to be clear about what’s actually driving this. As Black Brick founder Camilla Dell explains, the recent wave of macroeconomic and banking-sector headlines has weighed heavily on confidence, even where the direct financial impact on London property is limited:
“We have lurched from one crisis to another and although the latest issues in the banking sector don’t directly impact London property, they affect sentiment and people’s investment portfolios. If people are feeling less wealthy, they are going to be nervous.”
The International Buyer Opportunity
One of the clearest routes out of the current impasse is a stronger return of international buyers — a trend many in the market have anticipated since sterling’s sharp fall against the dollar last year. Prime central London values remain around 18% below their 2014 peak in sterling terms, and roughly 40% lower in dollar terms, even accounting for the pound’s recent recovery — a meaningful discount for overseas buyers with dollar or dollar-linked wealth.
International buyers accounted for 39% of prime central London sales last year, according to Hamptons — an improvement on the previous year, though still below the 2015–2019 average of 48%. Cash purchases have also become significantly more common: Savills reports that the proportion of cash buyers in the capital’s most exclusive postcodes rose from 66% in August 2022 to 74% over the following months, back in line with pre-pandemic norms, as higher interest rates have made mortgage finance considerably less attractive — and, for many buyers attempting to secure one, notably harder to obtain, with longer processing times and down-valuations becoming more common.
Pricing Remains the Key Sticking Point
Despite softening demand, many sellers in prime central London have been slow to adjust expectations — partly because values here have lagged the sharp house-price inflation seen elsewhere in the country in recent years, leaving many owners reluctant to accept a further reduction on top. Estate agents have, in some cases, compounded the issue by overpricing stock to win instructions in a competitive market.
The result is a widening gap between asking and achieved prices. Coutts analysis suggests around 35% of prime London listings have now had a price reduction, and LonRes data shows the average discount to asking price has grown to roughly 8%, up from around 5% in mid-2022. Even so, forecasts vary on how far values may ultimately fall this year — Savills expects a 10% decline in mainstream values, while Nomura has forecast a steeper 15% fall by mid-2024.
Meanwhile, London’s prime outer postcodes — areas such as Hampstead, Highgate and Wandsworth, which saw some of the strongest pandemic-era price growth on the back of buyers’ pursuit of space — may now be more exposed to correction than prime central London itself, given both the scale of their recent gains and a higher proportion of mortgage-reliant buyers in these areas.
Discretion Is Shaping How Owners Sell
A growing number of sellers are choosing to keep their properties off mainstream portals altogether, avoiding any public record of time-on-market or price reductions — a trend that reflects the same confidentiality drivers we see consistently in our own client base. Off-market listing platform Invisible Homes reports its volumes have quadrupled year-on-year. Owners without urgent need to sell are, in many cases, simply choosing to wait rather than transact into a soft market — a dynamic that is helping to keep nominal prices more stable than sentiment alone might suggest.
Rental Demand Has Surged in Response
With many prospective buyers choosing to wait out current conditions, rental demand across prime London has intensified sharply. LonRes reported new rental instructions in February running 49% below the pre-pandemic average, even as rents have risen 8% over the past year and now sit 19% above pre-Covid levels. For international buyers in particular, renting at even very high price points can still make financial sense given the scale of UK stamp duty on additional homes for overseas purchasers, now up to a marginal rate of 17%.
Our Take
The current slowdown in prime central London has far more to do with sentiment than with any fundamental weakness in the market. Buyers with cash, and particularly international buyers benefiting from currency advantages, remain active — the constraint is pricing discipline from sellers, many of whom have yet to fully adjust to a more selective market. We expect this pricing standoff to persist until sellers who genuinely want to transact begin pricing realistically, at which point we’d anticipate a meaningful pickup in completed sales.
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