Discounted Asking Prices - even Prime London has been hit

New data about the Prime London housing market shows that the average discount to asking price has increased to 8.4 per cent. 

And the data, from property consultancy LonRes, shows that the longer it takes to sell, the bigger the discount to asking price. 

The average discount for homes sold in under three months was 3.5 per cent but this rises to 14.5 per cent for properties that took more than one year to sell.

The latest LonRes market snapshot shows that so-called ‘achieved prices’ for sales to landlords and other buyers in February were at similar levels to those recorded prior to the pandemic, while sales volumes were just below their pre-pandemic average for February.  

But LonRes managing director Anthony Payne says: “However, the years leading up to the pandemic were not easy ones for the Prime London market as tax changes and political uncertainty hit confidence, prices, and activity.  Whether this is the new normal for London’s prime markets, remains to be seen.”

In detail, the number of properties sold during February in Prime London was 33 per cent lower than last year, but just 9.1 per cent lower than the 2017-19 average.  However, the number of properties under offer - a leading indicator for sales - was 10.5 per cent higher than the pre-pandemic average.  

Meanwhile, the number of new instructions continued to rise: 14 per cent higher than February last year and 23.6 per cent higher than before the pandemic.

In terms of asking price discounts, in September last year the average discount for homes selling in under three months was just 1.7 per cent while the discount for homes taking between six and 12 months was 7.3 per cent.  

Landlords interested in investing in Prime London may want to look at homes that have stuck on the market, because LonRes says its analysis suggests that getting the pricing right at the start of the process is key to a quicker sale while a property that struggles to sell may end up having to accept a significant discount further down the line.

The latest data for February shows the average discount to asking price has increased irrespective of the time it takes to sell – highlighting that the overall trend is driven by an increase in the discount rather than an increase in the time to sell.  

Payne says the Prime London market has recorded much lower price growth than the national market since 2015 when stamp duty changes hit the top-end of the housing market hardest. 

Even the recent housing boom of 2020 – 2021, while having a bigger impact on activity at the top-end, boosted prices more in lower value markets.  As such, the relative under-performance in prices relative to the national average has continued with Prime London prices in February just 1.7 per cent above their pre-pandemic average and still 5.0 per cent below their 2015 peak. 

There are multiple reasons for Prime London’s underperformance in recent years but changes in taxation have been significant, he concludes.

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