Britain’s high-end domestic market is expected to weather the coming economic storm better than the broader market, Savills said in a report on Thursday.
Later in the day on Thursday, the Bank of England raised interest rates by 0.75 percentage points to 3% – the biggest jump since 1989 – and warned that the nation was heading for its longest recession in modern history and that a recovery was not expected until the summer of 2024. All sectors of the real estate market are predicted to experience downward price pressure next year.
But with less reliance on borrowing and greater ability to invest cash, buyers with the deepest pockets will be relatively unscathed, particularly in central London.
In 2023, prices in central London are forecast to fall by 2%, compared to a 10% fall in the main market. And by the end of 2027, Savills expects average prime values in central London to increase by 13.5%, more than double the 6% increase expected in the overall market.
After years of uncertainty, prices for the most luxurious homes in central London are currently 18% below their 2014 peak, meaning they “still look good in historical terms, especially when viewed against the backdrop of weaker sterling and a strong dollar,” Frances said. McDonald, Savills research analyst, in the report.
“It appears that a price recovery in this market is long overdue.” This will help protect against more significant price falls, although it increasingly looks like a stronger price recovery will not materialize in earnest before 2025, given the global economic backdrop and the prospect of a UK general election in 2024,” she said. .
Meanwhile, in major regional markets, which have seen “unprecedented levels of price growth since the early days of the pandemic”, values are expected to fall by 6.5 per cent next year, but are expected to rise by almost 10 per cent by 2027.
“Macroeconomic pressures will have a mixed impact on major regional markets,” Ms McDonald said. “Buyers in the prime markets of London’s suburbs and its suburbs tend to be earlier on their way up the housing ladder and have higher mortgage debt requirements. These markets will see significant price declines next year, especially since they have been some of the strongest performers since the pandemic began.
However, markets across the wider south – including coastal hotspots such as Cornwall, Devon and Norfolk – are likely to be more resilient due to their number of cash buyers, she added.