PCL witnesses large lockdown price drops, but market is recovering

Knight Frank’s latest PCL (Prime Central London) index reveals that average prices in this market declined by 2.1% in April, the largest such drop since January 2009, when the market was feeling the impacts of the global financial crisis.

Despite this, early indicators suggest the downwards pressure on prices has softened since the market reopened on May 13. The average discount to asking prices for sales in London during the market lockdown was 6.4%, but since the market re-opened this figure has fallen to 5.5%.

The average offer made in the capital, meanwhile, was on average 10.2% below the asking price while lockdown measures for the property market were in place, but that has narrowed to 7.6% since May 13.

Demand is also recovering fast, with the number of new applicants in London 35% above the five-year average in the week ending May 30. This is further helping to reduce the downwards pressure on prices.

While the number of new applicants in the week ending May 30 was 14% below the figure recorded in the second week of March, the equivalent decline was 43% for new instructions to sell – which suggests demand is still outstripping supply in this sector and keeping prices high.

The property market reopened on May 13, having been virtually shut down to all but essential house moves since March 23, but opinions on prices remain divided until supply and demand trends become clearer, as a recent Knight Frank survey showed.

“It feels remarkably similar to the period that followed the EU referendum,” Tom Bill, head of London residential research at Knight Frank, said. “There is a mix of opportunistic bids that are unlikely to be accepted, bids agreed at a reasonable discount and many cases where the asking price is right and the guide price is met or exceeded after competitive bidding. It will take a while for the market to find its feet.”

Activity levels in the second week of March had not been visibly affected by the Covid-19 pandemic, with the number of new prospective buyers 41% above the five-year average as a result of the post-election bounce. The number of instructions to sell, meanwhile, was 13% higher.

Knight Frank expects prices will fall by 5% in prime London markets this year, with most of this fall already factored in. Based on an analysis of achieved prices over the last 10 weeks, alongside other economic and housing market data, the global property consultancy has revised its prime London indices downwards for March and April, as the tables below show.

In May, average PCL prices dropped by 1.4%, taking the annual change to -5.1%. The monthly decline in prime outer London, meanwhile, was 1.7% in May, producing an annual decline of 5.8%.