London’s Luxury Home Market Has Been Dragging for Years. These Sellers Are Diving in Anyway.

Lesley and Johan Denekamp are keenly aware that now isn’t a great time to be selling real estate in central London. Nonetheless, in September, they went ahead and listed their 3,800-square-foot townhouse with Knight Frank, for $5 million.

Why now? The couple are sick of waiting, having already sat out Brexit and the pandemic. “We don’t think we are going to live forever, and four million pounds is a lot of money to have tied up in a house we don’t really need,” said Johan Denekamp.

The couple bought their house in St Katharine Docks, a former dockyard now an upscale marina lined with apartment buildings and houses, in 1997 for an amount they declined to disclose.

Both had jobs in London. Johan Denekamp, 64, was in advertising. Lesley Denekamp, 62, worked for insurers Lloyd’s of London. She could walk to work since the docks are less than a mile from the City, London’s historic financial district.

About 10 years ago the couple, both now retired, built themselves a country home in the county of Wiltshire. Unfortunately, driving through London’s traffic to make the 100-mile trip made their journey unnecessarily long. They decided to relocate to west London and in 2018 moved into a new-build apartment in the Brentford neighbourhood.

The couple then listed their townhouse for $6.56 million. But during 2018, the property market was hit by Brexit-related jitters and they failed to find a buyer. They decided to wait, rented the house out and sat out Brexit. Then came the pandemic and they had to sit out that, too. They have now had enough of waiting and are trying again, despite a new challenge to the market: rising interest rates.

Between November 2021 and August 2023, the Bank of England hiked rates from 0.1% to 5.25%, although it did agree to hold rates steady at its most recent meetings in September and November. Data shows that the upper end of London’s housing market appears to be bearing up well against rising mortgage costs.

According to Savills, average sale prices during the third quarter of 2023 in Prime Central London (PCL—defined as the neighbourhoods encircling Hyde Park) dropped just 1.2% compared with the third quarter of 2022. They are 0.9% higher than in March 2020.

Across prime London, a wider area incorporating most central neighbourhoods plus particularly affluent suburbs, such as St John’s Wood and Hampstead, average sale prices during the third quarter of this year dropped 2.1% compared with the same period last year, said Savills. Prices are 3% higher than in March 2020.

But, just like in major U.S. markets, while prices are holding up reasonably well in central London, the number of deals being done is down.

Stuart Bailey, head of prime sales London at Knight Frank, said transaction levels in October 2023 were 15% down compared with the same month last year.

The reason is that buyers are out to bag a bargain, while many sellers are holding out for a great offer, said buying agent Jo Eccles, managing director of Eccord. “PCL is really resilient, a lot of people don’t have any borrowing, and owners can afford to wait,” she said. Buyers, meanwhile, want a good discount. “London is not a compelling investment at the moment,” said Eccles.

Bailey said the performance of London’s prime market can be split into three categories. The first is homes priced at $3.75 million or less, a needs-based market of mainly domestic buyers. The second is the $12.5 million-plus super-prime market, dominated by globally wealthy and risk-averse investor buyers. These two sectors, Bailey said, are still trading well.

The market between $3.75 million and $12.5 million is flagging. “This is a highly discretionary sector, and it is the bit which is being squeezed,” he said.

Whatever the price bracket, Camilla Dell, managing partner of buying agency Black Brick, said that homes she describes as “best in class” still attract multiple bidders. These, she said, are properties on sought after streets and garden squares, in immaculate condition, with great views and good light. “They are properties which are without compromise,” she said. “They rarely come up for sale and are always competitive.”

Will Pitt, senior director at U.K. Sotheby’s International Realty, has seen the same trend, with American buyers in particular eager to take advantage of the weak pound. “Favourable exchange rates have enhanced London’s appeal for overseas investors,” he said.

Turnkey homes are in particular demand among time-poor buyers, said Pitt. “This marks a change from pre pandemic trends, likely driven by soaring construction costs and labor shortages,” he said. “We expect this focus on minimising renovation costs to intensify moving into 2024.”

Sophia Lucie-Smith, 36, believes the fully refurbished four-bedroom, four-bathroom townhouse in the Chelsea neighborhood that she bought in 2020 (she declined to disclose the purchase price) and shares with her 8-year-old daughter, Petra, meets the best-in-class criteria.

She has decided to sell the property so she can spend some time living in California, where her mother lives. In November, she listed the property for $9.9 million with Sotheby’s International Realty.

“I am conscious about the market but I think this is a really special house,” said Lucie-Smith, a nutritionist. “There is not a huge amount of good stuff on the market.”

The other homes that trade well are those that look like good value for money. “Buyers want a discount,” said Eccles. “To sell a home which is not so special you have to be bold on pricing, and if you are, then you will get interest and buyers may then bid the price back up.”

Sensible pricing is the Denekamps’ strategy. Their home’s asking price breaks down as $1,315 per square foot. Denekamp said he has seen other homes around the docks achieve $1,749 to $1,875 per square foot in recent months.

“I think it is at the cheap end of sensible,” said Denekamp. “We don’t want to sit and wait and talk about the five million pounds we could have got for it five years ago. We don’t have any children to leave it to, and we could wait 10 years for the market to change.”