UK prime property markets face renewed caution

After a relatively strong start to the year, the UK's prime property markets are now facing renewed caution, according to Savills.

While property price declines slowed and activity remained robust in the first quarter of the year, particularly in prime central London and country houses, a shift in sentiment is evident. Prices in prime central London fell by a modest -0.7%, an improvement from the previous quarter, and country house values saw an even smaller dip of -0.3%. Market activity, especially for properties over £1 mln (€1.17 mln), showed signs of recovery in February and March.

However, Savills' latest analysis indicates that buyers and sellers are less confident than they were at the end of the last quarter. This is partly due to ongoing price sensitivity, particularly in London's domestic markets, which are more exposed to higher mortgage costs.

Conversely, prime markets in the Midlands, North of England, and Scotland experienced price growth in the first quarter, as they are less dependent on mortgage financing. Across all prime regional markets, values are down by -0.2% on the quarter and -3.9% annually. Notably, the very top end of the prime regional market (properties over £2 mln) saw some relief, with quarterly dips easing as tax changes were not as severe as anticipated.

Frances McDonald, director of research at Savills, commented: “For buyers who can see through the current disruption and take a medium-term view, properties at the top end remain good value, with prices not far off where they were pre-pandemic in many cases. Recent events are likely to reinforce the UK’s status as a safe haven, particularly within an attractively priced prime central London market where values are down 25% compared to their 2014 market peak. As a result, demand is more likely to come from overseas buyers seeking a London bolthole, rather than a broad return of non-domiciled residents. At the same time, higher stamp duty costs are expected to moderate any upward pressure on prices, with early signs suggesting some of this demand is instead being diverted into the capital’s prime rental sector.”