Market Insights July 2023
Please see below our July Market Insights, highlighting the key trends we’re seeing in the prime central London property market this month.
As always, please don’t hesitate to contact us if you have any property search or property management requirements or questions.
Founder & Managing Director, Eccord
+44 (0) 20 7244 4482
Prime purchases dominated by cash rich buyers
Many active prime central London buyers still have substantial cash savings and, so far, remain relatively insulated from the squeeze being experienced across the wider market.
Between January and May this year, 71% of prime central London transactions were purchased entirely with cash, compared to 60% in the same period last year. Amongst our own buying clients, they are split almost 50:50 between mortgage vs entirely cash buyers.
Sellers have always favoured cash buyers due to their ability to act quickly, and even more so now, in a time where transaction timescales have become much more protracted and valuers are being cautious with their valuations.
However, sellers would be well advised to value good mortgaged buyers too, and the commitment they are making. This includes having to jump through multiple hoops, provide extensive documentation, endure a lengthy mortgage process and make peace with higher interest rates. All of this requires absolute commitment and where a purchase is agreed, we’re seeing high success rates from offer accepted to exchange as a result.
The purchase process is taking much longer than usual – we have seen the average time to mortgage offer increase from 4 – 5 weeks, to 8 weeks this year. We are therefore advising mortgaged buyers to be organised from the outset, with tax structuring conversations concluded and a mortgage agreed in principle if possible. Goodwill and swift progress at the start of a transaction is vital if extra time is needed further down the line.
Demand for flats is on the rise
Buyers seeking large lateral living spaces and generous proportions are driving demand for apartments, particularly new builds providing high levels of security and service.
Apartments have accounted for 44% of £5m+ transactions across London so far this year, up from just 28% in 2021.
There are positive signs that the gap between buyer and seller price expectations is beginning to close and, whilst both sides remain highly price sensitive, there is a growing willingness to find common ground to enable transactions to proceed.
The Bank of Mum and Dad makes up a proportion of activity, typically spending £1 – 5 million to set their adult children up in homes and at the same time reduce future inheritance tax liabilities. Demand at the higher price levels is coming from predominantly international buyers.
Aggressive tactics poses threat to transactions
Sentiment remains delicate and it’s more important than ever for buyers and sellers to ensure their team of representative agents and lawyers are aligned with their communication style and messaging.
We have seen several instances recently where overly aggressive tactics and tone have been deployed by a seller’s estate agent or lawyer, which has nearly derailed a transaction close to exchange unnecessarily.
Considerable diplomacy is required in any transaction and we have been required to temper the communication and messaging being passed on to our clients on a number of occasions, in order to maintain the tone of the transaction and achieve the successful conclusion that both buyer and seller are aiming for.
With average transaction times taking much longer, the importance of transparency, good manners and an ability to work constructively between all parties cannot be underestimated.
Landlords test the sales market but return to rentals
Landlords who are coming under pressure from rising mortgage costs are making the decision to test the sales market when tenancy breaks arise, but many are finding themselves unable to achieve the sale price they want. Especially those who own £1m - £5m apartments, which have underperformed the family house market.
The 2014 peak of the market means anyone who purchased an apartment in the last ten years may likely be facing selling at a loss, which can be difficult to accept. Within the portfolio of rental properties we manage, ten landlords have tried to sell their investment properties in the last six months, but seven have returned to the rental market to re-let and sit tight for the time being.
This is a good example of the discretionary nature of many sellers and one of the primary reasons that prices in prime central London have shown such resilience since the start of this year. If sellers can’t achieve the price they want, many are choosing to simply withdraw and turn to the strong rental market, rather than sell at a loss. Their ability to hold on may well change over time, but at the moment many are in a position to do so.
We are seeing no new investment purchases purely for buy to let, as the returns fall short versus alternative assets which are now providing higher yields. Our clients who are still buying for investment are doing so with a dual purpose, for example, they intend to live in the property themselves in the future or they’re buying as a long-term investment for children.
Prime London’s appeal remains strong with corporate relocators
Shrugging off headwinds arising from Brexit and coronavirus, the corporate relocation market is once again active.
On behalf of our landlord clients, almost every property our property management team have let within the last six weeks has been acquired by a high-quality corporate tenant, the majority coming from the US and working in senior roles within tech, media and finance.
For our acquisition team acting for tenants, just over half of the way through the year, we have already doubled the volume of relocation work we undertook last year on behalf of corporate clients.
London’s global reputation as a safe haven with outstanding schools, rigorous financial and legal systems and a lively cultural scene remains hugely appealing, and international buyers are also circling the market in more significant numbers with a view to buying in the second half of this year or early 2024.
Schools and lifestyle continue to be the primary draws, and there are several notable retail, restaurant and hotel launches in the imminent pipeline which highlight the substantial investment into prime locations. Safety is also a factor; we were contacted by an American couple who, due to major concerns about gun crime in the US, recently acquired a significant property in London with a plan to relocate here.
Whilst there are considerations with any global location, London remains a destination of choice and when comparing the cost of buying, owning and selling a property over a ten year period, it still sits in the middle compared to other major global cities.
Thank you to Taylor Howes for providing us with their beautiful imagery.
For 17 years, Eccord has been trusted by private clients, family offices and international companies to provide property search, relocation and property management services.
Our award-winning team has since successfully acquired over 400 properties and manages a portfolio of more than £1.5 billion of rental properties and private homes.
T: +44 (0)20 7244 4485