Savills: Savills Prime Sales Index, Q3 2024

The latest prime sales index (Q3) reveals that values for prime properties in predominately needs-based outer London markets grew marginally over the past three months (+0.2%). While those in Prime Central London, where demand is more discretionary, fell by -0.7%, given concerns around changes in the tax environment and general market uncertainty,

Beyond London, prices of prime homes eased back marginally (-0.5%), with short-term downward pressure on prices felt most keenly in prime coastal markets where second home ownership is most prevalent.

“A more competitive mortgage environment, supported by the prospect of further interest rate cuts has continued to support activity across both the prime and mainstream housing markets”, says Lucian Cook, head of residential research at Savills.

“However, while we would usually expect the top end of the market to be the first to react to improved market conditions, concerns over what the budget may hold have made buyers more cautious, especially in the most discretionary prime markets.”

Outer prime London outperforms PCL

In London, demand from needs-based domestic buyers has been spurred on by a more competitive mortgage market. As a result, the outer prime London property market returned to positive annual growth in Q3 (+0.9%) for the first time since December 2022.

Family houses popular among a younger demographic of wealthy homeowners, in areas such as Hackney (+1.8%) and Victoria Park (+1.2%), have performed the strongest in the quarter. 

Small price falls in prime central London neighbourhoods reflect a prospective increased tax burden which ranked as the top buyer concern (73%), according to Savills agents, followed by general market uncertainty (36%)*.

“Tax concerns, including changes to non-doms tax status, have caused potential buyers in central London to take stock of their situation. However, while there is plenty of anecdotal evidence of people reviewing their tax status, there’s little evidence of this resulting in more stock hitting the market,” says Cook. 

“Although there is speculation about what the October Budget may bring, the downside risks in these markets are mitigated by the fact that values remain low in a historic context, and by the enduring appeal of the capital, which will ensure that even those affected are likely to keep a base in prime London neighbourhoods.”

Scotland and the North outperform with an urban vs rural divide

Beyond London, prime markets are generally continuing to feel the effects of cooling market conditions post-pandemic.

As a consequence, demand for top-end properties located in regional cities and towns, such as  Sevenoaks, York and Edinburgh, proved more robust than those located in villages and other rural locations.

While prices fell by -0.5% on the quarter across all prime regional markets, values in the Midlands and North of England, and across Scotland rose slightly by +0.3%. Further cuts to mortgage rates in the coming months are expected to gradually improve buyer sentiment more broadly, says Savills.

Country and coastal pandemic hotspots remain more price sensitive

The prime country house market proved to be a little more price sensitive (prices down -0.8% in Q3 2024%), though not to the same degree as prime properties in coastal locations where a -1.8% fall in values in the quarter, has contributed to a -5.2% movement in prices over the past year.

“Concern over council tax increases and potential greater exposure to capital gains tax has meant pricing in this particular market has come under increased pressure over the past 12 months, although short-term falls are coming off strong growth which occurred during the post-pandemic mini-housing market boom. While demand remains for waterfront homes there is more competition among vendors, meaning that realistic pricing is becoming increasingly important in this market.”

* Based on 1^st or 2^nd ranked concern