Central London’s Main Market (PCL) could escape a property downturn, says JLL.
The real estate and agency brand pointed to low debt reliance and a high prevalence of international buyers – increasingly aided by sterling’s weakness – as reasons why prime markets may not follow the path of the rest of the UK.
Its analysis found that dips in the value of sterling amid the Chancellor’s controversial mini-budget last week meant that those who hold dollars or dollar-pegged currencies are finding their money will stretch even further .
Rates ahead of the Bank of England’s intervention at the end of September would mean those buying in dollars would pay 19% less on average for prime property in central London than they would have a year earlier early and almost 38% less than they would have paid at the peak in 2014, JLL said.
Chinese shoppers would save nearly 10% off prices a year ago and more than 27% off 2014 peak levels, according to JLL.
Its own PCL index recorded house price growth of 1% between the second and third quarters of this year and 1.7% annually.
This took average prices 5.3% higher than their pre-pandemic levels.
The most expensive homes saw the highest annual growth, with properties priced at £10m or more growing 3.8% a year, compared to 1.2% growth for homes under of £2 million.
The high end of the market also continues to see strong growth compared to the pre-pandemic period, with prices for £10m plus homes increasing by 11.1% compared to 2.4% for homes at less than £2 million.
Houses continued to outperform apartments, although the gap is narrowing.
Apartments in the third quarter of 2022 recorded an annual increase of 1.4% against growth for houses of 2.8%, a difference of 1.4 percentage points.
That compares with a 6.3 percentage point difference at the peak in the fourth quarter of 2021.
Marcus Dixon, director of UK residential research at JLL, said: “Looking ahead, it is still too early to assess the impact that recent government policy announcements and the subsequent reaction of global markets will have on the housing market.
“Although with rising interest rates and cost of living pressures far from easing, we do feel increased downward pressure on prices and activity in the year ahead.
“But we don’t think that’s necessarily the path the major markets will go. On the one hand, buyers are much less dependent on debt, which means the impact of rising mortgage rates is unlikely to be as profound as in the traditional market. Second, central London attracts a significant number of overseas buyers, and a weak sterling exchange rate could draw potential buyers to the market in the coming months. For the dollar and currencies pegged to the dollar, the case remains particularly compelling.