Outer prime London also experienced positive quarterly growth – up 0.8% in Q1, as greater stability returned to the cost of mortgage debt, tempting domestic upsizers back to the market.

While homes in prime central London experienced the first quarterly growth in six successive quarters (0.1%), albeit the only discernible uptick in values was in the market between £3-5 million (0.3%).

Source: Savills prime London index Q1 2024

“The outlook for the housing market has certainly improved, partly because the mortgage market has recovered more quickly than expected. With the first rate cut rapidly coming into view and recessionary risks easing, greater stability has returned to the cost of mortgage debt, which has positively impacted domestic prime markets where many buyers rely on borrowing, most notably in leafy outer prime South and West London, as well as the commuter belt,” comments Lucian Cook, head of residential research at Savills.

“Against that backdrop, our March client survey of 1,200 buyers and sellers showed a further pick up in commitment to move, and provided early signs that buyers’ budgets are beginning to edge upwards.

“This all points to a market that is in early stages of recovery, albeit a finely balanced one. Despite a general election nearing, the short odds on a change in government mean that political change is already largely priced into the market. However, some buyers are expected to remain slightly more cautious in the run up, particularly given the abolition of non-doms status, which, although expected on a change in government, took the market by surprise at this juncture.

“However after an initial hiatus, we expect to see a period during which those affected reflect on what the precise changes in their tax position mean for their longer term plans. As a result, parts of prime central London are expected price sensitive for a while longer.”

Competitive pricing remains crucial in regional markets

Beyond London prices bottomed out in the first three months of the year, signalling the arrival of a Spring market and reflective of stronger levels of activity in many locations.

The UK’s prime regional markets saw more significant falls during the back end of 2022 and 2023 as buyers focused more on the practicalities of commuting and limited how much debt they were prepared to take on. Values fell by a total -6.0% between September 2022 and the end of last year- but are still 10.6% up on pre-pandemic.

Urban areas – including Edinburgh, Glasgow, Bath and Oxford – are continuing to outperform (up 0.6% in Q1), as pandemic trends continue to unwind. But while there is still downward pressure on larger properties in more rural areas, the rate of price adjustments has slowed significantly.

Source: Savills prime regional index Q1 2024

Lucian Cook continues, “The market signals we are seeing are typical of an early stage recovery, with both buyers and sellers rebalancing expectations. However, recovery will not be linear.  

“Almost every agent (88%) across the regions expects to see stock levels improve over the coming three months, meaning that buyers will have more choice, and sellers will need to remain competitive on pricing. 

“Our agents also agree that regional buyers are more concerned about the potential for market uncertainty as a result of the upcoming general election (93% vs. 70% in London), followed by changes to taxation for private schools (80% vs 15% in London). As a result, buyers are still expected to be less committed until the dust has settled.”