Market Insights December 2023

Please see below our Market Insights, outlining the key trends we have seen in the prime central London property market.

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 & Managing Director, Eccord

+44 (0) 20 7244 4482

jo.eccles@eccord.com

LinkedIn

Reflections on a challenging year

2023 has been a challenging year for the prime central London property market. Sentiment has been incredibly delicate and the large gap between buyer and seller expectations has been the biggest barrier throughout the year.

Despite seasonal flurries of activity, transaction volumes are down approximately 25% year on year, with activity driven almost entirely by trophy home purchases or needs-based buyers moving due to new jobs, expanding families and school places.

International and pied a terre buyers have been present, but many haven’t deemed purchase opportunities or discounts compelling enough to transact. This has reduced activity within the discretionary ‘flats’ market.

For buyers who have been searching but not yet purchased, many are still grappling with the dilemma of best in class versus perceived value for money. Best in class properties across the board have continued to achieve strong prices which is at odds with discount seeking buyers, who must decide whether they want to underpin their investment with best in class, or achieve a discount on a slightly less coveted property.

For buyers who have purchased, sellers have had to adjust their prices to make it happen and buyers have had to show greater flexibility, such as agreeing to 6 month long-stop completions which are becoming increasingly common in the family house market.

In many cases transactions, have taken twice as long to reach exchange due to longer finance processes and an unwillingness on either side to take a view on points which previously might have been accepted. Goodwill has been tested on both sides as a result, and we have had to utilise all our powers of diplomacy and intricate knowledge of the purchase process to maintain momentum and nurture acquisitions through to completion. 

Sales agents wary of hybrid buying agents

Reputation and track record have been paramount this year and, for a number of our client purchases, we were the first and only party to be shown extremely discreet buying opportunities. Gaining our clients access to these properties has required us to guard our market reputation and maintain our founding principle: to always remain on the buy side – never crossing to the sell side.

We have seen an increasing number of our competitors pivot their offering to act for both buyers and sellers, but this move to directly compete with estate agents has made most of the leading selling agents wary and unwilling to show hybrid buying agents their best stock.

Last year we referred more than £100m of sales instructions to the selling agents we knew were genuinely best placed to handle our clients’ sales. The London estate agents know that we are one of the few ‘pure’ buying agents who don’t compete with them for sales instructions or sales revenue, and this is a significant reason they trust us with their most valued properties and collaborate with us to open certain off market doors.

Shifting dynamics in the rental market

Record rents and a shortage of supply earlier this year drove fierce competition for rental homes and resulted in many tenants being forced to pay more than they might have otherwise been comfortable with.

But dynamics in the rental market are now starting to shift as the supply of properties increases - driven in part by ‘accidental landlords’ who are holding off from selling surplus properties until conditions improve in the sales market, opting to turn to rentals in the short to medium term instead.

Many tenants who have been locked into rental contracts at higher rates are now taking the opportunity to review their options and shop around for alternative properties which might offer better value for money. Landlords therefore need to find a commercial balance between attracting and finding good quality tenants who will stay long term, and chasing short term inflated rents.

Landlords who are keen to sell in the medium term are keeping their options open by agreeing renewals or new tenancies with 6 or 12 month break clauses in their contracts. Those who are planning to sell in the short term are reliant on good relationships and communication with their tenants if they are to successfully orchestrate a sale without having to serve notice to the tenant where possible. This is one of many reasons why building good and consistent relationships between property managers and tenants is key.

Loyalty holds firm for landlords

As many large estate agents focus on lettings revenue, the competition for lettings and property management instructions has never been more fierce.

What this means for landlords - some of ours included - is that they are being approached by letting agents aggressively seeking new business and doing so by promising to achieve higher (but unrealistic) rents in order to win an instruction or lure it away from competitors.

We've seen landlords approached cold, via LinkedIn or contacted directly where an agent has taken their client list from a previous employer.

The challenge landlords now face is what and who to believe. Should they be tempted by promises of much higher rent (which could be at the detriment of net yields due to void periods) or promises of superior property management service from a one or two-man band?

Many landlords take comfort in a strong and established team who are known to them, consistency of service and expertise. They don't want the uncertainty of moving to a new rental and property management offering who may have adopted aggressive tactics in an attempt to meet revenue targets and secure new business.

Where a good service is being provided, we're finding loyalty holds firm. This year we spoke to a number of our landlords to understand what is most important to them. Whilst net yield and competitive fees were of course a commercial factor, the most important elements for them were in fact stringent tenant vetting processes to ensure good quality tenants, and a responsive property management team. The overarching priority was for the hassle factor of being a landlord to be removed.

With this insight, we have made our tenant selection process even more rigorous to give our landlords peace of mind that genuine care and attention has gone into who is renting their property, including introducing some innovative changes to the process. And our property management team continues to focus on preventative maintenance, rather than reactive, so our landlords are able to benefit from more predictable cash flow and rental income.

My appointment as a Daily Telegraph columnist

I am honoured and delighted to be announced as a new property columnist for The Daily Telegraph, giving insight into the world of prime and super prime property, and sharing practical advice and tips with Telegraph Money readers.

My first column shared guidance on navigating the inside world of off market property, and the second, published this week, advises buyers on how to successfully navigate and negotiate in this market.

I would be delighted to discuss any questions or topics you may have and please don’t hesitate to contact me: jo.eccles@eccord.com