London's property market has remained resilient despite facing significant challenges in 2022. Inflation shot into double figures, interest rates rose quickly, and Westminster appeared to be perpetually embroiled in political upheaval. However, according to Halifax, while the annual rate of growth has slowed, December’s house price index shows that prices increased by 4.7% last year¹.

In the capital, particularly in the prime central London (PCL) market, performance was equally strong – if not stronger. Overall, prices in London bucked the national trend and grew by 0.2% in December. Meanwhile, since the pandemic, the PCL market has grown by 2.4%, and demand for properties valued £5 million or higher was at its highest level in the first nine months of a year since 2006 in November 2022¹.

Admittedly, the wider market is expected to cool in 2023 as a result of rising interest rates, incessant inflation and the economic fallout of Liz Truss’s mini budget. The Office for Budget Responsibility foresees a 9% drop in prices this year as buying power is reduced¹. However, the PCL market shouldn’t see prices decline to the same extent as its recovery appears to be gathering pace¹.

One reason for this is the lack of supply in the PCL market. When combined with demand volumes that look set to grow by 30%, this trend should continue into 2023. Therefore, while the wider market can expect sharper dips in prices, Beauchamp Estates contend that the top echelons of the market could see growth of 1-2% in the next 11 months or at least remain at their current level¹.

Furthermore, as David Toogood states "that while the mortgage rates, interest rates generally and inflation are all factors in the marketplace, the inescapable truth is that the basic economic laws of Supply & Demand dictate the rising price levels. We are simply not building enough new homes. The Government has scrapped its 300,000 per annum target followed by many Councils who have also scrapped Housing targets. Coupled with an arcane Planning system that builds in confusion and delays this can only result in the supply side falling while demand rises so that prices will inevitably increase."

The nature of buyers is another differentiating factor. Due to the prevalence of high-net-worth buyers, the harsh effects of economic headwinds aren’t going to be felt to the same extent¹. Soaring mortgage rates are pricing new buyers out of the market while homeowners looking to remortgage are facing crippling increases in payments².

In conclusion, while London's property market is expected to cool down in 2023 due to various economic factors, it will remain resilient with certain areas such as PCL seeing growth or at least maintaining their current levels.

(1) What is the outlook for the Prime London property market in 2023?. https://www.propertywire.com/opinion/what-is-the-outlook-for-the-prime-london-property-market-in-2023/ Accessed 24/03/2023.
(2) UK’s 13-year housing market boom to end in 2023, surveyors predict. https://www.theguardian.com/business/2022/oct/13/uks-13-year-housing-market-boom-to-end-in-2023-surveyors-predict Accessed 24/03/2023.
(3) London house prices: How bad will the crash be in the 2023 recession?. https://www.cityam.com/buy-and-sell-what-london-house-prices-might-do-in-2023/ Accessed 24/03/2023.