London Luxury Home Price Drops Accelerate on Pandemic Impact

(Bloomberg) -- The green shoots of recovery for home prices in London’s wealthiest districts have been stamped out before they even took hold.

Prices in prime central London dropped 0.3% between March and April, taking the annual decline to 1.3%, according to a report published Monday by broker Knight Frank. It’s the first time in more than a year that the annual rate has accelerated, erasing early signs that the market was bottoming out after last year’s fraught Brexit negotiations.

“The number of lost sales due to coronavirus is growing,” Tom Bill, head of London residential research at Knight Frank, wrote in the report. “While four in five deals underway when the pandemic struck are still holding together, transaction numbers in the week ending May 2 were 54% below their five-year average.”

The pandemic has crushed hopes of a recovery in London’s housing market after years of sustained declines. Brokers had forecast a return to house price growth this year after the Conservative party’s decisive election victory in December helped lift the political uncertainty that’s been weighing on demand and raised hopes of favorable tax tweaks.

There are some signs that activity could be creeping back after being decimated in the early weeks of the U.K.’s lockdown, the Knight Frank report said. The amount of deals exchanging contracts and the number of buyers registering have staged a small recovery since the end of March, though remain well below long-run averages.

Where deals are progressing, buyers are negotiating discounts. The average sale price in April was 94% of the original asking price, down from 97% in January, Knight Frank’s data show.

©2020 Bloomberg L.P.