Just last year, the UK property market was on the rise, with prices surging in spite of the preceding pandemic which saw the Bank of England predict a fall of up to 16 per cent in early 2020. It would have been easy to assume that it had weathered that storm surprisingly well, but the ongoing economic pressures that have emerged since then – from the war in Ukraine to the continuing fall-out from Brexit – have revealed otherwise, and so far 2023, the property market has remained turbulent.
Even so, the luxury segment of the market has held firm, with price growth stabilising in London. The city’s prime markets saw average values remain broadly flat (0.1 per cent) in the first quarter of the year, with higher-value properties that are typically less impacted by surging interest rates, continuing to outperform. Whilst the price of prime pieces of real estate worth less than £1 million fell – albeit by a tiny 0.2 per cent – early on in the year, those topping £2 million have seen their value increase by around 0.3 per cent, with even more expensive properties following suit by more or less the same amount.
With the unexpected 10 per cent growth that surprised us all back in 2021 well and truly behind us and a cost of living crisis and rising inflation, interest and mortgage rates to contend with in 2023, overall, the market still has some substantial storms to weather before the year is out.
Of course, seasoned luxury real estate buyers will know that often, the luxury market is a law unto its own when compared with the mainstream housing market, but nevertheless, the next 12 months could prove challenging. Here, we take a look at our predictions for the rest of 2023 and into 2024 – and high-end house buyers in the UK should take note.
How will the luxury market perform for the rest of this year?
Well, it goes without staying that those who can afford to purchase prime pieces of real estate tend to be less financially impacted by things like rising energy bills and the surging cost of food and other household essentials – and many have little, if any debt on their current properties, which means they’re still in a great position to buy this year. It also means that fewer home owners will be forced to sell as a result of the current climate, and that luxury properties will continue to better retain their value as a result.
The luxury market isn’t entirely immune to the factors impacting upon mainstream house prices – but with inflation expected to peak in the summer months, the light could well begin to reappear at the end of the tunnel as we move further into the second half of the year, starting from the current Q3 onwards.
To sell, or not to sell?
Although house prices might seem more favourable to buyers across the board at present, rising inflation and mortgage rates are seeing many remaining hesitant to purchase just yet and holding fire as opposed to making any sudden moves. This means that the highest priced homes are less likely to be snapped up quickly unless you’re prepared to significantly drop your price – so unless you’re desperate then now is unlikely to be a good time to sell.
Demand does still remain high in certain areas, however – particularly in London. In Suburbs like Wimbledon and Richmond, we’re still seeing some healthy movement within the market, with homes in the £2-5 million range proving particularly popular as the areas continue to grow and thrive. And properties located within easy access of local transport links and in close proximity to green spaces in the capital are also still in demand.
Buyer vs seller expectations
It’s of course good news that prices amongst luxury real estate are remaining relatively steady, but the gap between buyer and seller expectations is becoming more apparent. Those seeking to purchase property are still expecting to pay around five percent less than current prices reflect, and it seems sellers are unprepared to drop prices in alignment with this.
Luxury property prices are still considerably higher than they were in the first three quarters of 2022, so realistic pricing that meets somewhere in the middle will be essential for maintaining momentum over the final quarter of the year and into 2024.
There do seem to be more properties on the market now than there were earlier in the year, but many buyers still feel this isn’t the ideal time to purchase. However, over the next six months we could see that begin to ease up even more.
Making your move
If you’re planning on snapping up a luxury slice of real estate in a prime and highly sought-after location that is only likely to increase in value over the longer term, then it’s worth making your move sooner rather than later, given that in six to twelve months, you’ll be unlikely to get a better deal.
In the right areas, there are some great property prices to take advantage of, and if you’re a cash buyer who will be unaffected by fluctuating mortgage rates, then there’s little reason not to make a move now rather than waiting until 2024.
