Date Published 12 April 2023
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.'
Prime London Homebuyers Want Discounts
Percentage of brokers reporting a 5% or higher drop in buyer budgets.
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.
Cheaper Homes
UK property sellers are agreeing to the biggest discounts in 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.'
