JLL – Prime Central London (PCL) Index – Q2 2023

PCL Rental Index
PCL Sales Index


The recent rise in interest rates does not impact all sectors of the housing market equally.  With more than half of all owner-occupied homes having no mortgage secured against them and cash purchase, particularly in higher value prime markets, making up a significant proportion of homes sold. Analysing sales across London boroughs over the last 12 months shows 44% of homes in City of Westminster and 49% in Kensington & Chelsea were purchased in cash. This compares to 19% London wide. (Source: JLL Research using HM Land Registry)

 Of course, there will always be households who need to move. But in times of uncertainty and higher rates it is discretionary movers who are most noticeable in their absence. So, while the lack of reliance on expensive mortgage debt weighs less heavily on prime purchasers the higher proportion of discretionary buyers does.  With wider market sentiment impacting purchaser propensity to buy in PCL this quarter. 

Q2 2023 Sales Index

The JLL Prime Central London Index saw prices fall for the third consecutive quarter.  The Q2 2023 index recorded a quarterly fall of 2.1%, with prices 5.9% down compared with the same period in 2022. Prices are now 6.8% lower than they were when prices peaked in the third quarter last year. 

The upper echelons of London’s prime market are proving more resilient. With prices down 0.8% in the 12 months to June 2023 compared with a 6.7% fall in homes priced at under £2 million (likely to be most impacted by changes in interest rates).

Despite sentiment impacting prices we saw deals agreed (exchanges) increase in an admittedly slow Q1 this quarter, with a 28% increase in sales in Q2 2023.  With volumes on par with Q2 2022 (down -1.2%).

Stock levels rose in Q2, with 8.3% more properties on the market than in Q2 2022 and 9.7% more than at the end of the first quarter this year. Stock on the market is now at the highest level since the end of Q2 2020.

Q2 2023 Lettings Index

The uncertainty which is hampering activity in the sales market often has the opposite effect on lettings. With households more likely to stay in rented for longer or choosing to rent when delaying their decision to buy. Just over half (51%) of JLL deals agreed in Q2 2023 were renewals, up from 45% a year ago and 24% in Q2 2021. This was the highest rate of renewal since Q2 2020.

The number of new lets rose this quarter compared with last, up 13%.  But the second quarter is usually more active than the first. Comparing new lets agreed (excluding renewals) in the second quarter this year with Q2 last year showing there were 18% fewer deals agreed, with the number agreed down 35% compared with the Q2 five-year average.

This quarter the JLL Prime Central London Index saw rents rise by 1.9%, with rents 5.4% higher than they were at the same point a year ago. Small flats (1 and 2 beds) saw this highest annual increase in rents at 6.7% whereas more expensive properties (£3,000 per week or more) saw a more modest 2.9% annual increase.

Rents are now 26% higher for one-bedroom flats (which have seen the highest growth) than they were three years ago at the end of Q2 2020. With the JLL Prime Central London Rental Index 19.2% higher overall over the last three years.

For prospective tenants having to contend with low stock levels there appears to be some respite as we move into the summer. Stock levels are starting to increase, albeit off a low base. With the number of rental properties listed to let at the end of Q2 2023 up 13.8% on the same point in 2022. But volumes remain 55% down on levels we were seeing pre-pandemic in Q2 2019.

All Source: JLL/ LonRes

Our JLL Prime Central London Index is based on a ‘basket’ of properties, valued by JLL at the end of each quarter.

Director of UK Residential Research at JLL, Marcus Dixon, explains:

“The implications of stubborn inflation on the UK mortgage market are hampering activity in prime central London. While fewer buyers are heavily indebted - almost half buy cash - uncertainty surrounding the short-term outlook is impacting prices.

“The lettings market remains competitive, stock levels have improved on their 2022 lows but there are still more prospective tenants than there are properties. This has resulted in further rent increases this quarter, with rents almost 20% higher than they were in 2020.

“The lower end of the rental market continues to see a steady stream of (formerly) prospective buyers moving across into lettings. With smaller properties, mainly one- and two-bedroom flats, recording the highest annual increase in rents, while prices for similar properties are seeing more significant falls than homes in more expensive price bands.”

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