The Flat Season: Political turmoil has done the market few favours

A week or so back we had the Epsom Derby, generally seen as the pinnacle of the flat racing season. The week before we had Chelsea Flower Show. These come right in the middle of ‘the season’ which kicks off with the Cheltenham Festival (horse racing over jumps) in March and ends with the Goodwood revival in September (car racing in vintage clothes) with Henley, Ascot, Wimbledon, Lords etc in between.

The property market traditionally has its own season, the spring market. The 2023 spring market however feels very much like a ‘flat’ season with a different emphasis on the word flat. In fact, to continue the racing analogy, the property market came out of the starting stalls at the beginning of the year at a gallop, only to hit soft going by early April. Read less

There are perhaps many and varied reasons for the changing fortunes over the first half of this year. Despite all that the world faced, and there was much to be despondent about, the prime London property market seemed in rude health as the post Covid world took off.

However, this new optimism appeared to stumble as it faced various hurdles in the 2nd quarter. It started with the month of Ramadan, between 22nd March to 20th April, which overlapped with the Easter weekend on the 7th to 10th April which was then followed by the back-to-back holidays in the UK for May day (1st May) and the coronation (8th May). Perhaps less influential, but talked about nonetheless, was the extremely late skiing season!

Meanwhile the reality of rising interest rates took hold, it was only back in November that the base rate was at 3% (1.25% in June 2022) but by May 2023 it was 4.5%. Meanwhile a tired party in Government facing up to a listless opposition is like watching two geldings fight for the attentions of a brood mare….what’s the point if either wins! (here ends the horse analogies).

The following provides some support data to this overview, courtesy of our ‘go-to’ source, LonRes:

• Agreed sales for the month of April were at a record low, excluding the lockdown-affected April 2020, and down almost 35% annually
• However, sales taken over the course of the year to date are only 1.4% below the pre-pandemic average between 2017 and 2019
• Across all prime London areas, the average discount to asking price rose to 9.1%, the highest in more than three and a half years.
• Additionally, the number of properties under offer, a lead indicator, was 11.7% lower than a year earlier, suggesting that activity is unlikely to increase significantly over the coming months
• In some positive data, new instructions in April were up by 8.8% on April last year, taking the year to date rise to 9.2%.
• Average values across prime London also showed a slight fall in April, with an annual decline of 0.9%.
• Prime inner London was the best performing area, recording annual growth for the first time in six months where it was up 3.5%.
• The market is looking better at the top-end though, with £5m+ sales volumes in April up 26.1% annually and 58.2% above the April pre-pandemic average.
• The number of properties going under offer in April also grew, 13.6% up on a year earlier.
• We have alluded to the strength of the super-prime market in earlier bulletins, and this continues to perform as a ‘pull’ on the market. The contrast with the broader domestic market, where the ‘push’ factor is so critical, could not be more apparent. While both are sentiment influenced, the latter is nearly entirely dependent upon affordable and available mortgages, and the former more reactive to exchange rates and taxation.

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