UK prime property: Buy, sell, or hold?

5 minute read

With peak inflation and interest rates seemingly reached, find out if now might be a good time to review your property portfolio. 

Please note: The external views expressed in this article are not the views of Barclays Wealth Management, and forecasts are not a reliable indicator of future performance. Professional advice should always be sought when selling or buying property.

Much like the weather, the UK prime property market has perked up in recent weeks. Certain regions are in full bloom, thriving from a pick-up in demand as buyer interest heats up. However, this is certainly not the case across the board and there are some regions struggling to flourish amid a lack of affordability. The difference between the regions is stark, with distinct trends across the UK painting a somewhat nuanced picture.

The key question is whether those regions in bud continue to blossom, or will they struggle and wilt in the sun?

“Green shoots are finally emerging in the UK prime property market, although it’s likely to see regional variations,” says Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank and Wealth Management. “Buyers are also increasingly focused on practicality – factors like commute times, reliable internet connectivity for remote work, and achievable budgets are taking centre stage.”

London – a safe-haven? 

UK prime property has experienced a notable adjustment since the turmoil of the mini-budget in September 2022.

According to Savills, there has been a 6% overall decline in UK prime property prices since that budget, which cut a third off the 17.6% post-pandemic gain.1

“However, significantly, a number of the UK's prime markets, particularly in London, have experienced growth in the first quarter of this year – marking the first positive movements since the mini-budget,” says Frances McDonald, Director of Residential Research at Savills. “London’s prime markets are now outperforming their regional counterparts, reflecting a shift in buyer priorities.

“The capital has also seen particularly strong growth, especially for larger family homes – a trend that’s held firm since the pandemic. What’s also interesting is the London flats market, which had faced challenges, has also begun to show signs of recovery.”

However, for prime central London (PCL), which is often associated with international buyers of prestigious homes in Mayfair, Kensington, and Chelsea, growth has been almost non-existent since the mini-budget, dropping by just 1% over the near two-year period2 – a smaller fall than witnessed in other prime markets.

As McDonald explains: “PCL is affected by a slightly different set of drivers, catering more to discretionary purchases – so any political or economic uncertainty feeds into that market.”  

Despite the ongoing geopolitical turmoil weighing on sentiment, London remains an attractive place to buy. This is particularly the case for international buyers who are drawn to the city’s perceived safe-haven status and recent weakness in the pound.

It’s not all about London 

Outside of the capital, there is strong demand for urban living – such as in Edinburgh, Glasgow, Bristol, Bath, and Oxford – which is being supported by a healthy job market according to Savills and expanding commuter zones.

With an increase in activity in London and across the regions, the market appears to be well on the road to recovery. Agreed sales across the UK are up 15% compared to the first quarter of last year, with transactions reverting to the volumes last reached in early 2022, according to TwentyCi, a UK property data company.3 This has been driven, in part, by improving mortgage affordability, with peak inflation (and therefore peak interest rates) seemingly reached.

“Prices seem to have stabilised,” says McDonald at Savills. “While we're not completely out of the woods, inflation is showing signs of slowing down – although not quite as fast as some economists predicted. Nevertheless, there’s a significant rise in activity, which aligns with the positive trend of people feeling more confident about their budgets and the market in general.

“We’re also expecting to see a rise in property listings over the next quarter, offering buyers more options and putting pressure on sellers to remain competitive on price – so the recovery may not be linear.”

Tom Bill, Head of Residential Research at Knight Frank adds: “This year, we need to keep an eye on two key factors: mortgage rates and the timing of the general election. A later election date could fuel a stronger spring/summer bounce in the market. Additionally, any potential cuts to mortgage rates could further influence the recovery’s strength and pace.”

What’s your strategy? 

As UK interest rates look set to fall in the not-too-distant future, and as the prime property market recovers, property investors need to think carefully about what the future holds.

Whatever the right decision may be – whether to sit tight, cash in, or add to a burgeoning property portfolio – broader estate planning remains an important consideration.

“Regular reviews are good practice, regardless of market conditions – ensuring alignment with your evolving needs,” says Bill. “For instance, expiring fixed-rate deals and proposed ‘non-dom’ tax rule changes could also have an impact.

“And if you’re thinking of buying more property – costs, purchase price and mortgage rates remain key factors.

“But even with one property, planning is key. The trend of buying further out from London, driven by the pre-existing affordability squeeze – this wasn’t something that started suddenly during the pandemic. It is picking up again as hybrid working patterns become more established. However, it’s all an ongoing process – and it’s likely to be a few years yet before everything fully plays out.”

And, as Moroukian at Barclays Private Bank and Wealth Management concludes: “For high-net-worth (HNW) borrowers reaching critical junctures in this dynamic market, comprehensive analysis is paramount before finalising any decisions. The current market presents a broad mix of options and trends, as evidenced by the increasing use of flexible-rate borrowing strategies.”

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