A standoff between sellers looking back at the 2021 and 2022 markets and buyers anticipating a weaker one is stifling the prime London market, research suggests.
Analysis by property data firm LonRes shows there were 26.7% fewer transactions in May compared to a year earlier, although this is only 6.0% down on the 2017-2019 pre-pandemic average
Looking ahead, both new instructions and properties under offer were down on an annual basis in May, by 7.9% and 20.4% respectively and broadly in line with the 2017-2019 average.
This indicates that future activity is likely to remain subdued, LonRes warned.
The early part of the year has seen higher numbers of homes coming to the market and the year-to-date figure is 5.2% up annually and 12.3% above the 2017-2019 average.
While the overall volume of stock on the market is growing slowly, according to the research, there are variations to be found among the price bands.
There was 32% more stock on the market with an asking price of £5m or more at the end of May compared to the pre-pandemic average.
In contrast there were 5% fewer properties available at £1m to £2m.
The top-end of the sales market has cooled again after its strong start to 2023, LonRes said, with stock levels for properties priced at £5m or more growing while the sales figures for May suggest that demand may be falling slightly.
New instructions at this top-end of the market rose 2.1% annually in May and are 47.7% above the 2017 to 2019 average.
The number of properties going under offer over the month followed a similar pattern.
There was a 28.9% fall on an annual basis but under offers remain high in a longer-term context – 42.1% above the 2017-19 May average level.
The level of transactions in the £5m-plus market across prime London also followed the same trend. There were 31% fewer agreed sales in May compared to a year earlier, although this figure is 13% above the May pre-pandemic average.
Overall, achieved prices were down 0.6% annually in May but up 2.5% on the pre-pandemic average.
Nick Gregori, head of research, LonRes said: “We’re hearing from agents across prime London that some markets are a little slow and that it can be tricky to get deals over the line. Where vendors and buyers are motivated and pragmatic, agreement can be found and sales are still happening, just at a slower pace than the past couple of years.
“For those who are less committed to moving, we have seen something of a standoff between sellers looking back at the strong 2021 and 22 market and buyers anticipating a weaker one in the near future. But our latest data on discounts and price reductions shows this gap in expectations may be starting to close.
“The £5m-plus market had looked less susceptible to the general lack of confidence in the wider economy and housing market, but even here we are seeing emerging signs of uncertainty.
“Sales are steady, but more stock is coming to market, and increasing numbers of those on the market are being reduced in price.”