Market Insights March 2024

Please see below our March Market Insights outlining the key themes we’re seeing in the prime central London property market this month and the potential impact of the Chancellor’s Spring Budget.

As always, the team and I would be delighted to discuss any property search or property management requirements you may have. In the meantime, we wish you a happy Easter break.

Best wishes

Jo Eccles

Founder and Managing Director, Eccord

+44 (0) 20 7244 4482

jo.eccles@eccord.com

LinkedIn

Balanced buying activity returns

As we head towards the Easter break, we are seeing balance return to the prime central London property market, with variety of buyers searching at different price points and locations, which wasn’t the case last year.

Throughout 2023, activity was dominated by wealthy prime and super-prime buyers and 60% of the client purchases we handled were £10m or above. However, the first quarter of this year has seen the return of mid market buyers with budgets of £5m - £10m and we are representing a broad range of searches in this price bracket.

Some examples of this include a Chelsea pied-a-terre just under £2m which we have agreed for a hotel and restaurant entrepreneur who has trusted us with his property requirements for over 15 years. We have also agreed a £4m family home in Islington for an American film maker and her financier husband, who have relocated to the UK and are now seeking to base themselves here permanently. Plus a beautiful turnkey lateral flat in Notting Hill just over £6m for a young German client buying a London base.

Activity in higher price brackets also remains and we have just exchanged on a trophy home in Fulham at just over £10m for an energy trader client.

Many of these buyers are discretionary but are committed to London for the long term. For the majority of last year, prices were not compelling enough for discretionary buyers to achieve good value, but we are engaging with a higher number of realistic sellers who are open to negotiation.

We are seeing a moderate rise in distressed sales since the start of this year which is presenting opportunities for buyers who can move quickly.

A good deal of tact is required during negotiations to secure discounts, and inexperienced buyers who are too aggressive in their approach are achieving little success. 

Capital gains tax reduction won’t encourage landlords to ‘cash in’

I was privileged to be asked to write a House Guest column in The Sunday Times explaining why we don’t believe the capital gains tax reduction will have a significant impact on landlords’ decision making.

In his Spring Budget, Jeremy Hunt announced that, as of this April, higher rate taxpayers selling residential property in the UK will pay 24% capital gains tax – down from 28%.

Whilst some expect this might encourage landlords to sell their properties, we believe this alone is unlikely to have an impact on their decision making. In reality, a significant proportion of properties bought within the past 10 years, since the peak of 2014, are worth less than what they paid.

On a recent property tour with a client buying an apartment for his son with a budget of £2m - £3m, all of the 10 properties we showed them were pied a terres or buy to let investments that owners wanted to dispose of. In eight of those cases, the owners were prepared to accept the same price they paid for it – or less. With no capital gains on the property, Jeremy Hunt’s tax break will have little impact.

A much bigger driver for landlords to sell remains higher mortgage interest rates, and many of those who don’t have the cash resources to pay down their mortgages are seeking a sale ahead of a higher rate mortgage renewal.

Potential impact on the super-prime market of scrapping of ‘non-dom’ tax status

The Chancellor also moved to abolish the ‘non-dom’ status that allows wealthy foreign residents to avoid paying UK tax on overseas income. This has often been used by ultra high net worth individuals living in London, allowing them to opt to pay tax only on income earned in, or transferred to, Britain.

There are transitional arrangements being put in place for existing non-doms and much of the finer detail is yet to be revealed, so it is too early to say for certain what the true impact will be on London’s competitiveness as a global destination for UHNWIs.

Along with tax specialists and representatives from private banks, we have had many conversations in the last fortnight with wealthy clients who have indicated their concern over the changes. Some are reviewing the tax regimes in locations such as Italy and Dubai, yet the prestigious British education system is a critical factor in their decision making.

Because of this, many wealthy families with children are reluctant to leave London altogether. Instead, we could see them choose to enrol their children into British boarding schools – rather than day schools – and base themselves elsewhere, in the process swapping their super prime London mansion for a smaller London bolthole. This may result in non-dom demand for £30m - £40m properties being replaced with more modest £10m - £15m properties. But it is too early to tell.

Rental market normalises

Last month we reported that the supply of rental properties, particularly in the core flat market, is increasing steadily and alongside this we are seeing softening of tenant demand.

Together these factors signal the end of the highly competitive rental market and record high rents that have characterised the last few years, and a return to more normal market conditions. There were 20 – 30% more properties on the market in February compared to a year earlier, albeit it from a very low base, and we are agreeing rental increases of 2 - 6% for landlords at renewal and new tenancies. 

Periods of adjustment can be challenging, particularly as landlords continue to roll off fixed rate mortgages and face a sudden increase in mortgage costs. But the long-term outlook for London remains largely positive, with rental demand underpinned by London’s relatively high share of 20 – 34-year-olds compared to other European cities.

Landlords are now needing to price competitively, market proactively and invest in ensuring their property is in turnkey condition to secure the highest quality tenants who are likely to remain long term. Despite market conditions, most landlords’ focus is still towards securing a good quality tenant, and they will opt for a void period rather than accept a tenant whose profile isn’t reliable.

Eccord named one of the UK’s top buying agents

The Eccord team and I are honoured to have been named once again by Spear’s Magazine as one of the UK’s leading buying agents. Spear’s Magazine, which ranks the leading experts advising HNWIs, named just eight buying agents across the country as the leading, top tier property advisors.

Noted for our “reputation for discretion, honest advice and insight, alongside a proven track record of securing exceptional results for clients”, we genuinely love what we do and our reputation is the cornerstone of our business.

We are privileged to be recognised by such a highly regarded authority in the private client world.