Wealthy London homebuyers are demanding discounts on luxury properties, but sellers aren’t willing to knock down the price.
Over half of prospective purchasers looking for a prime London property expected at least a 5% discount in the first three months of the year, compared with 6% in the same quarter of 2022, according to a report from broker Savills Plc. Meanwhile, only 13% of sellers were prepared to drop their price by 5% or more in the same period, underscoring the widening gap between buyer and seller demands in the capital.
“Price sensitivity is creeping into the wider market,” said Frances McDonald, director of residential research at Savills. “Buyers are not feeling the same urgency that they felt last year, and are happy to bide their time to find the right home and at the right price.”
Discounts have been sneaking into Britain’s housing market since the end of 2022, as higher borrowing costs and a drop in house prices tilt the balance of power in favor of buyers. The average discount to asking price to close a sale was 4.5% in February, according to property portal Zoopla, the most in more than five years.
The problem for London’s luxury homebuyers is that sellers are rarely willing to reduce asking prices. This gap in expectations — alongside a tougher market — likely contributed to flat house-price growth in prime central London in the first three months of the year.
Becky Fatemi, chief executive officer of buying agent Rokstone, says super prime sellers are standing firm on prices on the basis that there is limited supply of comparable properties. The owner of one of Rokstone’s listed homes in Hyde Park Gardens has so far refused to budge on the asking price, despite multiple offers.
“Deals are definitely far harder to get across the line,” Fatemi said. The super prime market is “at a standstill, so buyers and sellers need to be more willing to flex on pricing if we are to break out of this stalemate,” she added.
Still, luxury sales have outperformed the wider London market since mortgage rates soared to 14-year highs in October last year. New sales instructions for homes priced at £5 million ($6.2 million) or more were 74% higher in the final quarter of 2022 compared with the pre-Covid average, according to data compiled by researcher LonRes.
“Higher price bands — especially £2 million-plus — and best in class turnkey properties, are continuing to hold up more strongly,” Savills’ McDonald added. “Realistic pricing is expected to play an increasingly critical role over the next couple of months, and will be vital for sellers.”
©2023 Bloomberg L.P.
