Cash buyers who can avoid rising borrowing costs are buying a larger share of London’s most expensive properties, boosting the resilience in London’s high-end property market.
According to Savills, equity buyers purchased 71 percent of prime central London homes between January and may of this year. This compares with 60 percent in the same time period in 2022.
This was up from 61% between January and April 2019, before the pandemic.
The increase in wealthy buyers who are willing to pay cash for the top-tier properties in the capital is despite the increased pressure that many homebuyers feel due to the higher rates in recent months.
Moneyfacts, a data provider, reported that the average cost of a fixed-rate UK mortgage for five years had reached 6 percent for the first since November 2022. The Bank of England has been increasing interest rates in order to combat stubbornly high inflation.
Frances McDonald is director of residential research for Savills. She said, “The established prime market most associated with equity-rich buyers holds up the best amid the mortgage market turmoil.”
The research of the estate agency highlighted the contrast between the price stability of prime location properties in central London, where cash buyers are the most common, and those in suburbia that are more dependent on mortgages.
In the second quarter 2023, the prices of homes worth over PS5mn were flat. However, those worth between £500,000 to £1mn dropped by 2.1 percent and the market below £500,000 fell by 2.5 percent.
In the second quarter 2023, prices in London’s most desirable locations dropped by 1 percent annually. Home values are now 3.9 percent higher than they were before the pandemic.
Savills reports that parts of London, which are typically associated with international buyers, including Mayfair and Westminster, outperformed other areas, such as Richmond or Holland Park, where the property values fell in the first half 2023.
Rupert des Forges said that the wealthiest pockets in central London are from places such as Turkey, Scandinavia, and the West Coast of the US.
Cash buyers made up 35 percent of all transactions in outer London for luxury homes between January 2023 and May 2023. This is an increase from 26 percent in the same period last year.
Savills reported that outside of London, prime property values dropped 3.5 percent year-on-year in the second quarter.