Market Insights May 2024

Please find below our May 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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Summer general election may bring certainty to the marketplace

Whilst the summer election may cause short term disruption within the property market, certainty of outcome and planned policies could boost buyer and seller activity levels.

Recently, I was invited to speak alongside political broadcaster Tom Newton Dunn at a private bank breakfast briefing, where we discussed the potential impact of a Labour government on wealth. Tom shared his opinion that Labour would pursue a pro-business agenda, refraining from increasing business taxation and encouraging innovation to drive long term economic growth.

Should Labour win, inheritance tax is likely to be under review, along with an overhaul of the council tax system which is currently based on property valuations from 1991, potentially resulting in the introduction of several new higher bands.

One policy we are certain of is the introduction of VAT on private school fees, which is likely to impact the affordability of buyers. This could be particularly evident in areas such as Fulham, Battersea and Queens Park where many mainstream house owners have larger mortgages and less disposable income. In our experience though, discretionary spending and holidays will always be cut first, and any changes to school arrangements will be a last resort.

The polls may be pointing to a decisive Labour victory, but it’s early days. At a recent event hosted by Theresa May MP, she predicted a hung parliament, with each party falling short of the magic number required to form a government. If Labour are elected, the expectation is they will announce all major policy changes within the first 12 months of their term.

Bold price cuts leading to competitive bidding

In light of the current election uncertainty, some buyers are choosing to sit on the fence for another year, but market activity continues.

Discretionary buyers are present in the £3m - £8m price range and we are active with client searches for London pied-a-terres and banks of mum and dad buying for grown up children.

The £15m - £20m family house market has been busy with sellers instructing bold price cuts on houses which have been on the market for 9 – 12 months and need refurbishment. In numerous cases, we have seen 12 – 15% price reductions resulting in 3 or 4 buyers competing against each other. A lot of these buyers have been searching for some time and are pressing ahead with life decisions and seizing value or long term purchase opportunities.

Almost 90% of properties for sale require refurbishment, so any buyers who are unwilling to take on a project are struggling to find a suitable property.

In the super prime, despite Non Dom changes and election uncertainty, the market has seen some significant transactions already this year between £40m - £80m, reminding some sceptics of the power of London’s global appeal.

Non Dom tax changes could benefit prime rentals

Non Doms in London fall largely into two categories. Firstly, those who work in senior roles in the City whose income is mostly UK based, and they opt for the remittance basis to protect the assets they had before moving to the UK. They are likely to have to remain in London to do their jobs and generate their current income.

The second group are global UHNWIs who do not need to remain in the UK to make or maintain their wealth. Whilst the first group is tied to London in order to benefit from the income and associated lifestyle, the second is far more mobile.

There is an expectation amongst leading tax specialists that we will see a departure of more of the second group if Labour is elected and presses ahead with protected trust plans to expose worldwide assets to 40% inheritance tax. Current UHNWIs pay approximately £12.4bn of tax revenue, and estimates suggest this could reduce by £3bn - £6bn if they leave.

It’s too early to understand exactly what the impact on the prime central London property market will be, but we expect to see more global UHNWIs arriving in London choosing to rent, rather than buy. The new four year regime coming into effect from April 2025 means anyone moving to the UK will not have to pay tax on income earned overseas for the first four years – after which they will pay UK tax on their global income.

We may therefore see a trend of short term four year stays in the UK, in which case UHNWIs may choose to focus on super prime rentals, instead of purchasing, which would be welcome news for high-end landlords.

Netflix’s Buying London versus the real world of super prime property

Buying London, Netflix’s London equivalent of Selling Sunset, launched earlier this month and has caused quite a stir among some selling agents in the industry.

In an interview with The Daily Telegraph, I was asked for my insights into the real life of London’s super prime property market, including the importance of absolute discretion, the technical demands of the job and the expertise that goes into finding and acquiring genuine off market properties.

Comparing real life super prime to the TV show, the interview included a recent example of a client of ours in Chelsea, on behalf of whom we personally spoke with 136 selling agents and brokers: “When sourcing homes for those on their books, Eccord will often go through the sales archives to pinpoint the perfect property and contact the owner on the off-chance they’ll sell – a method Eccles says succeeds 40pc of the time.”

The article also highlighted the importance of track record for discretion which is one of the reasons we are so frequently recommended to high profile personalities in the music and media world, as they require absolute discretion with their property affairs.

You can read the full interview here.

New law to give more rights to leasehold property owners

The Leasehold and Freehold Reform Act became law last week, which will make it easier and cheaper for leaseholders to buy their freehold, increase standard lease extension terms to 990 years for houses and flats, and provide greater transparency over service charges. The Act will also remove barriers for leaseholders to challenge their landlords’ unreasonable charges at Tribunal.

It will further ban the sale of new leasehold houses other than in exceptional circumstances, end excessive buildings insurance commissions for freeholders and managing agents, and scrap the requirement for a new leaseholder to have owned their house or flat for two years before they can buy or extend their lease.

The new powers will also help more leaseholders take over the management of their property if they want to. Leaseholders in some buildings are barred from taking over the management of the site or buying its freehold if more than 25% of its floor space is commercial – such as shops or offices on the ground floor. But this limit will now be increased to 50% to enable more homeowners to access Right to Manage or the right to a collective enfranchisement.

The reforms will not take effect until formally implemented by whichever party forms a government on the 4th July and therefore the timing of the introduction of the reforms remains uncertain. However, it is likely to be welcome news to many existing leaseholders, as well as reassuring to new buyers who are often unfamiliar – and can be uncomfortable with – the leasehold ownership concept.