Market Insights April 2024

Please find below our April Market Insights, outlining the key themes we’re seeing in the prime central London property market this month.

As always, the team and I would be delighted to discuss any property search, acquisition or property management requirements you may have.

Best wishes

Jo Eccles

Founder and Managing Director, Eccord

+44 (0) 20 7244 4482

jo.eccles@eccord.com

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Supply dominated by sales of second homes

A significant proportion of properties currently for sale are not primary residences; they are surplus to requirement pied a terres, London bases (of international clients) or former rental properties.

Sellers are falling into two categories – those with mortgages and those without.

In the UK, approximately one third of the population rents, and the remaining two thirds own properties. Of those who own their property, approximately 50% don’t have mortgages, and many of those are concentrated in the wealthier areas of London.

A two-tiered sales market is therefore emerging in prime areas such as Chelsea and Notting Hill, comprising sellers who are starting to feel the interest rate squeeze and are increasingly focused to sell, versus those who can continue to sit comfortably in the discretionary seller category.

With our buying clients, our role is to exhaustively search on and off market opportunities to identify and gain them access to the very best properties, but also to help them understand the history of each property and evidence of where value lies. This is increasingly important for buyers when assessing their options, to weigh up the properties they like, alongside which present the most opportunity to achieve a discount.

Significant price movement can be achieved through negotiation in certain situations, often where a property has been mispriced initially and has stagnated on the market for a considerable time. For example, we have just agreed the £2.75m purchase of a spectacular penthouse on the South Bank which was originally listed at £3.8m. For another client we have recently exchanged on a £10.2m house in south west London which was originally asking £13.8m. In both cases the properties were surplus to requirements, but with meaningful service charge and running costs and having been on the market for a significant period of time, the sellers were finally ready to get on with a sale.

Adding value through refurbishment is no longer a given

Turnkey properties for sale remain few and far between – largely as most owners who undertake a big refurbishment intend to enjoy the end result themselves, and therefore don’t sell unless there has been a change of circumstances.

Those which are for sale will often command a significant premium, which buyers are prepared to pay (within reason) in return for certainty of costs and the immediacy of moving in and life continuing with minimal disruption.

It is worth noting that there is a limit, and turnkey properties which are unrealistically overpriced are reassuringly not getting traction. Buyer rationale still remains.

For unmodernised properties, we have - until recently – witnessed sellers digging their heels in and refusing to acknowledge the cost of refurbishment works in their asking prices. But this is now changing.

With buyer appetite to do works at an all-time low and approximately 85% of properties currently for sale requiring modernisation, sellers are increasingly being forced to accept discounts and absorb some of the required refurbishment costs, in order to entice buyers to undertake a project and facilitate a sale.

From a buyer’s perspective, they need to be mindful that adding value and enjoying a profit margin through refurbishment is no longer a given, and those taking on a project often need to be comfortable with an element of ‘sunken cost’. Their motivation for improvements must be their own personal enjoyment from living in a property that better suits their tastes and lifestyle – and accepting that they might not recoup every penny of expenditure when they sell.

Landlords’ number one priority remains quality of tenant

The rental market last year was dominated by tenants choosing to renew, whereas this year we are seeing up to 50% of tenants leaving at the end of tenancies.

Within the portfolio of properties we manage on behalf of individual and portfolio landlords, tenants are moving due to real life factors such as relocating for jobs, deciding to purchase a property, or upsizing to a larger rental property.

Outside our portfolio, tenants appear to be moving to seek better properties or value for money, now that the rental market is returning to more normal conditions, compared to last year when tenants were forced to compete for properties and pay premiums amid a severe supply shortage.

For landlords seeking to find and secure new tenants, their priorities couldn’t be clearer. We regularly speak to our landlords to find out what is most important to them. Every single landlord we spoke with in our latest round of feedback cited tenant quality as their highest priority, even over yields, which for most landlords was their second highest priority. They would rather secure a considerate, reliable and long term tenant, even if it means accepting a brief void period or a slightly lower yield.

A notable proportion of our landlords have had negative experiences before appointing us. If a tenant fails to treat their property with respect or neglects to pay the rent on time, the impact on the landlord – both personal and financial – can be devastating, which is why our team meticulously researches every potential tenant to build up a coherent picture of them before embarking on a tenancy agreement.

My latest Daily Telegraph column

In any home search, a buyer’s primary focus is on having an offer accepted on a property, at which point many assume the finish line is in sight. But in reality, they are only halfway there and what lies ahead is four to five weeks (or more) of delicate navigation, requiring a reliable contact book and expert coordination.

In my latest column for The Daily Telegraph, I discuss how assembling a first-rate team to represent you once your offer is accepted, is critical to ensure your property purchase progresses smoothly and quickly. From lawyers and surveyors to mortgage brokers and architects, knowing how to select an experienced and responsive purchase team will give you the best chance of reaching exchange of contracts and completion with minimal risk of a stressful, emotional and expensive fall-through.