The prime London market got off to a “sluggish start to the year” with transactions down by almost a quarter, while prices slipped by 2.2% in the first three months of the year, compared to the previous quarter, data from Coutts Real Estate shows.   

Prime London – properties valued at over £1m — saw deal volumes slump by 24.8% compared to the end of last year and are 33.9% lower compared to the same period a year ago, the report says.  

But the study “expects the second quarter to be much stronger in terms of transaction volumes”.  

The number of deals currently under offer is up 26% on the last quarter, and up 3% compared to the same period last year.  

Coutts Real Estate director Katherine O’Shea says: “There is an active pool of buyers in the market and buying agents on our panel are telling us best-in-class assets are continuing to hold their value.  

“Given there is such a small quantity of best-in-class assets — and very limited turn-key stock other than new-builds — values for good quality assets in prime London markets are likely to hold their value and prices are likely to be less impacted as much as transaction volumes over the course of 2023.”  

The survey says that although prices fell in the first quarter — prices are up 3.3% on average across prime London properties over the last year.  

However, it adds that prime prices in the capital are on average 7.5% below peak levels, “but this varies significantly by postcode”.  

The report points out that 45.1% of listings are lower than the original asking price, up from 36.9% compared to the end of 2022. Average discounts are “creeping up” to 8.6%, up from 5.6% six months ago.  

O’Shea adds: “Buyers are pricing in what they think the market will look like next year but this is at a standoff with sellers who are hanging onto prices from last year. The hope is that the second half of the year will see the market recover if inflation comes under control.”  

The Bank of England has hiked interest rates 11 times since December 2021 to stand at 4.25%, while inflation is 10.4%, a 40-year high.  

The study says there is still “plenty of appetite” from US buyers and dollar-pegged earners. Some agents tell the report that there is a relatively smaller share of European buyers than usual.  

British buyers are still active in prime London but “tend to be much more discretionary”.  

O’Shea says: “With the continued increases in interest rates, we expect activity to remain strongest in those parts of the market least reliant on mortgage debt such as prime central London postcodes.”  

But the survey points out that in some areas of the capital, homes are selling for well below their historic prices.  

Properties in Knightsbridge and Belgravia are 17.3% below the height of the market. Marylebone, Fitzrovia and Soho are 17.2% below peak levels, while Chelsea is 15.5% below previous market highs.  

The report adds that prices have also fallen in some outer prime markets.  

Homes in Wimbledon, Richmond, Putney and Barnes are 15.8% lower on average, compared to a year ago.  

However, in other areas of outer prime London, prices are rising.  

Homes in Battersea, Clapham and Wandsworth are up 2.2% in the first quarter, compared to the prior three months, and 0.5% up on a year ago.