London property market spring 2023 update

London street, property market

The UK and London housing markets have had a solid start to 2023, with many experts predicting that market activity will remain robust well into spring.

Although prices fell by 0.8% in March, the seventh consecutive month, demand is growing, with February new mortgage approvals increasing to 33% below the pre-Covid average, while the supply of homes on the market rose to 25% above the pre-Covid average in March.

Knight Frank has doubled its sales market forecast for 2025 from 2% to 4%, as it expects the market to bounce back faster, bolstered by falling fixed-rate mortgage rates.

The London view

If the national housing market presents a mixed bag, London - particularly the prime market - is in much stronger shape, with regions such as Kensington & Chelsea, and Westminster, remaining popular.

The higher proportion of cash buyers, combined with favourable exchange rates, rising rents and continued tight supply means there is plenty of competition among buyers who are unruffled by mortgage rate hikes.

In the prime central London market, property prices are set to rise by 3.5% in 2023, driven by a boom in demand particularly in the luxury sector.

Demand for properties priced at more than £15 million is also expected to increase by 30%. Even the most exclusive ends of the market are set to grow marginally or remain flat, bucking the rest of the market, which is predicted to fall.

The London rental market

Family moving in property

Ongoing tight supply and high tenant demand is set to bolster the London lettings market for the coming months, while the strength of the sales market means there could be fewer accidental landlords in 2023.

London recorded 14.9% annual rental growth in February, the highest in the UK, while experts have predicted 6% growth in the prime central London rental market for 2023, irrespective of what’s happening economically at a national level.

All these factors, alongside expectations for relatively strong wage growth in the next five years, bolster experts’ optimism for rental growth this year.

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UK Property Market - Autumn Update