Cash buyers able to avoid the hit from rising borrowing costs are snapping up a bigger share of London’s most expensive homes, fuelling resilience in the UK capital’s high-end housing market.
Equity buyers bought 71 per cent of homes in prime central London locations between January and May this year, compared with 60 per cent in the same period of 2022, according to data from estate agency Savills.
That was also up from 61 per cent between January and May 2019, before the pandemic.
The rise in the proportion of wealthy cash buyers hunting for top-tier homes in the capital comes despite the wider pressure on many homebuyers caused by higher mortgage rates, which have climbed in recent months.
Borrowers suffered a fresh blow on Tuesday after data provider Moneyfacts said the average cost of a five-year fixed-rate UK mortgage had hit 6 per cent for the first time since November 2022. The increase comes on the back of the Bank of England’s repeated interest rate rises in an effort to curb stubbornly high inflation.
“The established prime markets most synonymous with equity rich buyers are holding up the strongest amid mortgage market turbulence,” said Frances McDonald, director of residential research at Savills.
The estate agency’s research highlighted the growing contrast between the price resilience of prime-location homes in central London — where cash buyers are most prevalent — and those in suburban areas, which are more reliant on mortgages and therefore more sensitive to rate rises.
The prices of properties worth more than £5mn remained flat on an annual basis in the second quarter of 2023, while those of houses worth between £500,000 and £1mn fell 2.1 per cent and the under-£500,000 market dropped 2.5 per cent.
Prices across London’s prime locations registered an annual drop of 1 per cent in the second quarter of 2023, leaving home values 3.9 per cent higher than their pre-pandemic level.
Parts of London that typically draw international buyers — including Mayfair, Westminster and Marylebone — outperformed others, such as Richmond and Holland Park, that are more associated with domestic buyers and where property values dropped in the first half of 2023, according to Savills.
Rupert des Forges, partner at estate agency Knight Frank, said: “Right now [in central London] the pockets of wealth are coming out of places like Turkey, Scandinavia and the west coast of the US.”
Cash buyers accounted for 35 per cent of transactions for high-end homes in outer London between January and May 2023, up from 26 per cent in the same period in 2022.
Outside of London, Savills said prime property values fell 3.5 per cent year on year in the second quarter.
Source : FinancialTimes