London's prime property market has witnessed a remarkable increase in cash purchases over the past year, according to recent research conducted by JLL.
Based on data from HM Land Registry, JLL's findings indicate that a significant 44% of home purchases in the City of Westminster and 49% in Kensington & Chelsea were made outright in cash within the last 12 months, surpassing the London-wide average of 19%.
Furthermore, the research highlights a consistent decline in housing prices for the third consecutive quarter in the capital. JLL's prime central London index demonstrates a quarterly decline of 2.1% and a 5.9% drop compared to the same period last year. Overall, prices have decreased by 6.8% since reaching their peak in the third quarter of the previous year.
However, properties priced above £2 million have displayed greater resilience, experiencing only a marginal 0.8% decrease in prices over the past 12 months, while properties below £2 million have witnessed a more significant decline of 6.7%.
Despite the decline in prices, the second quarter of 2023 has shown an increase in sales activity, with a notable 28% rise compared to the slower first quarter. Moreover, there has been a surge in stock levels, with 8.3% more properties available on the market compared to the same period last year.
In the lettings market, the uncertainty surrounding the sales market has led to a trend of households opting for longer rental tenures, resulting in a surge of lease renewals. Over half (51%) of JLL deals agreed in Q2 2023 were renewals, marking a significant increase from 45% a year ago. However, new lettings have declined by 18% compared to the second quarter of last year and by 35% compared to the five-year average.
Rental prices have experienced a modest increase of 1.9% this quarter, with a notable rise of 5.4% compared to the previous year. One-bedroom flats have shown the highest annual increase at 6.7%, while more expensive properties have seen a more modest rise of 2.9%.
Despite a slight uptick in rental stock levels, they remain 55% lower than the pre-pandemic levels observed in Q2 2019. The housing market continues to be impacted by uncertainties and prevailing sentiments surrounding the sector.
Marcus Dixon, director of UK residential research at JLL, commented on the findings, stating, "The implications of stubborn inflation on the UK mortgage market are hampering activity in prime central London. While fewer buyers are heavily indebted – almost half purchase with cash – the uncertain short-term outlook is affecting prices."
Dixon further added, "The lettings market remains competitive, with stock levels improving from their 2022 lows. However, the demand from prospective tenants still outweighs the available properties, resulting in further rent increases this quarter, with rents now nearly 20% higher than they were in 2020."