Prime London markets are proving more resilient to rising interest rates than their mainstream equivalents, says Savills.

Prices in prime central London fell just 0.5 per cent during the past quarter and only 1.2 per cent on the year;outer prime London locations fell by a slightly greater 0.9 and 2.5 per cent respectively. 

However this compares to falls of 5.3 per cent in the year to August across the UK mainstream market, according to Nationwide.

The prospect of house price falls and wider market uncertainty is having the biggest impact on buyer sentiment across London’s prime property market, overtaking increasing interest rates, according to Savills.

“Prime markets have remained comparatively robust this year but our latest data indicates that prime London is not immune to months of rising rates and a wider economic and political uncertainty, which is still likely to put downward pressure on prices. Although the levelling off of interest rates and expectations of falls next year should go some way to inspire some confidence and support transactions” says the agency’s residential research director Frances McDonald. 

The agency says that while there has been growing acceptance from sellers that prices have fallen from pandemic highs, buyer expectations on price are still markedly lower than sellers. Some 53 per cent of agents are reporting that buyers are expecting to pay five to 10 per cent less for a home.

McDonald adds: “For all but the very best properties, buyers and sellers are as much as five per cent apart on price. Closing this gap will be crucial in maintaining activity levels for the remainder of the year, with those most prepared to be realistic on price likely to garner the best end result.”

Over the past three months there has also been a continued divergence in performance between different prime London property types, with houses holding up significantly better than apartments across every region.

“Sustained demand and short supply has underpinned growth for smaller properties in first-time buyer micro markets, such as Clapham and Wandsworth. Here, the Bank of Mum and Dad has a significant presence, meaning many first-time buyers frustrated by high rents are less reliant on more expensive, high loan to value borrowing” says McDonald.

“But locations where supply exceeds demand, including Canary Wharf and Wapping, present strong opportunities for young professionals working nearby and opportunistic cash investors, many of whom are buying from divesting landlords.”