Market Insights August 2024

As we come towards the end of the summer and approach the autumn market, we share the key themes we’re seeing in the prime central London property market.

Do let us know if you would like to discuss any property search 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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Off market to be treated with caution

Sellers’ price expectations remain ambitious and over the past 12-18 months, we have seen a growing preference among sellers offering their properties off market initially, wanting to test the market. In doing so, they are hoping to achieve a higher offer by avoiding the price test of property portals and on market exposure.

When working with an overly optimistic seller, estate agents will often support this approach, allowing the seller to dictate the initial asking price during this discreet first step in the sale campaign. But once the seller realises their expectations were too high, the property can then be formally launched to the open market at a more sensible price.

Buyers face considerable challenges without professional representation. Firstly, they can no longer rely on a few key high street estate agents in finding and gaining access to the best properties, as the sales market has become incredibly fragmented over the past few years and the number of selling agents continues to multiply.

In order to ensure all options have been found and considered, buyers now need to identify and reach out to nearly a hundred (or more, depending on their search area) recently formed boutique estate agencies, independent brokers and buying agents moonlighting as selling agents.

Secondly, gaining a sense of the true value of a property and negotiating effectively can be very difficult when so many off market sellers are asking a premium and there are fewer price points to reference. In the past 12 months on our off market purchases, in some cases we have agreed full asking prices, and in other cases we have secured discounts of more than 30%. In every situation, our clients had complete confidence we had found them the right property and were relying on us to advise on values and how to handle the negotiations successfully for them. 

As we enter the autumn market, many of the properties launching online are those which have been quietly marketed during the spring and summer months and have failed to sell.  Buyers need to be able to decipher whether value can be achieved, or whether to keep their cool and let the property gain exposure to the open market, with the objective that the seller’s expectations will fall lower.

Construction sector starting to cool off

Buyers and homeowners have been shying away from projects for so long, that some building contractors in prime central London are facing sparse pipelines and are now actively seeking work.

In recent weeks we have been contacted by interior designers offering to do smaller projects than they would normally consider, whilst architects report contractors being much more competitive on pricing and eager to win contracts, as their pipeline isn’t as strong as it has been.

While buyers continue to display a strong preference for turnkey properties, we are seeing signs that an openness to do works may be returning. This will bring more choice to buyers, as approximately 90% of the properties on the market at the moment require some level of refurbishment. With building contractors and interior designers now coming under some pressure to secure work in the run up to Christmas, we could see the price of work starting to move downwards, making the prospect of a project more financially viable and appealing.

This is also good news for landlords who are refurbishing their properties for the next tenancy cycle, if they’re committing to holding for the long term.

Future proofing is starting younger

A new and recurring conversation we’re having with clients is about future proofing a purchase for later living. This has become a key consideration for nearly all our buyers in their 40s, which wasn’t the case pre-covid.

Many are keen to ensure the property can accommodate all their needs alongside those of their wider family, including elderly parents. They want to know they have the option of staying for the very long term and would be able to live comfortably throughout all life stages.

In previous years, before the stamp duty reform and additional rates were introduced, we would help clients buy properties for their ‘here and now’ and they would return in line with life changes, such as moving on from a bachelor pad as they were getting married, or needing a larger family home for growing children.

But now, the prohibitive cost of stamp duty means they will often stay put in a current property for many more years than they expected and, when they do eventually move, they want to make sure their new home will last them as long as possible. 

This means having conversations such as how many children a client might be planning in the future, trying to predict which secondary schools toddlers might be eventually suited to, ensuring the home can accommodate teenage years, and whether it will be suitable for them in their 70s and 80s.

In one of many recent examples, we acquired a duplex lateral apartment for a banker client in his early 40s and a big appeal was that he could live there comfortably now with young children, but the space would also suit him and his wife in their later years. The property gave them the future flexibility to eventually live entirely on one floor, and the other could be used by carers or occasional guests as their living needs changed. Paying stamp duty only once and the property being able to see him all the way through life, with no need to go through the expense and upheaval of ever moving again, was a big appeal.

Landlords becoming more comfortable with buy to let

Landlords who have tried to sell but failed to secure a buyer at a price they’re willing to accept are now returning to the rental market, bringing an increase in supply and more choice for tenants.

Whilst speculation continues about a likely increase in capital gains tax (CGT) in the Autumn Budget on 30th October, this is unlikely to impact significant numbers of prime central London landlords who bought within the last decade, as many haven’t seen the value of their properties rise.

Amongst our own landlords, we’re seeing more becoming comfortable again with buy to let as a long term asset class, as returns on alternative investments have fallen and mortgage rates have begun to ease to sub 4%. Many are preferring to return to the rental market rather than trying to force a sale.

Landlords remaining in the market are being greeted with strong tenant demand. Every property we have rented out this month has received multiple bids and the appetite for good quality properties remains strong, which is typical at this time of year as tenants prepare for September – whether that’s a new academic term or a fresh start post-summer holidays.

This is combined with increased rental demand from prospective buyers who are still on the sidelines of the sales market, while mortgage rates remain relatively high. With at least one further base rate cut anticipated before the end of the year, we expect some of these would-be-buyers may start to explore a purchase and make plans to move away from renting.