Savills Report Highlights Concerns Over Overseas Buyers Dominating London Property Market
A new report by estate agents Savills has revealed that more than 70% of prime central London properties sold this year were purchased entirely in cash, fueling concerns that rich overseas buyers are dominating the market at the expense of working Londoners.
The term “prime central London” refers to an area stretching from Chelsea to Camden and Notting Hill to Westminster. The report highlights that 71% of properties in this area were purchased mortgage-free in the first seven months of 2023, compared to around 35% for the UK as a whole.
The report comes at a time when the Bank of England has pushed interest rates to a 13-year high of 5%, leading banks to raise mortgage rates, making large home loans increasingly difficult to afford. This has led to growing concerns about the impact of rising inflation on the housing market.
Despite these concerns, Savills reports that London’s prime market has remained remarkably resilient, with prices across the prime markets falling by just 1% compared to this time last year. This is in contrast to the UK housing market overall, which has seen a 3.5% fall in prices.
The report suggests that there is a growing divergence between cash and equity-rich buyers and other groups in their ability to transact, and between the very top end of the market and lower value segments. The £5m-plus London prime market has remained flat (-0.1%), while the £500,000-£1m market has seen some falls (-2.1%), and the under-£500,000 market has fallen further still (-2.5%).
Mayfair, Westminster, and Marylebone were the most popular areas with overseas buyers looking for pied-a-terres, with international travel picking up at the start of this year, led by passengers from Asia, the Middle East, and the US. While this has translated into increased demand, buyers at the top end remain discerning.
The report concludes that sellers will need to price pragmatically to align with prevailing buyer expectations, particularly in the more domestic outer prime locations where more buyers are dependent on borrowing. Frances McDonald, Director of Residential Research at Savills, said, “The established prime markets most synonymous with equity-rich buyers are holding up the strongest amid mortgage market turbulence. While London’s prime market continues to perform more strongly than expected, the most recent interest rate rises are likely to squeeze buyer budgets and increase price sensitivity.”
Overall, the Savills report highlights the growing concerns over the impact of overseas buyers on the London property market and the need for pragmatic pricing to ensure affordability and accessibility for all potential buyers.