Market Insights November 2024

Please see below our November Market Insights outlining the key themes we’re seeing in the prime central London property market this month, post the UK budget announcement and US election.

The team and I would be delighted to discuss any property search or property management requirements you may have as we look ahead to the New Year.

Best wishes

Jo Eccles

Founder and Managing Director, Eccord

+44 (0)20 7244 4482

jo.eccles@eccord.com

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Post-budget and US election uplift

Post-budget and US election uplift

There was a surge of activity in the weeks leading up to the autumn budget announcement, as buyers and sellers focused on getting transactions over the line before anticipated tax changes. One sales agency reported exchanging on 42 separate sales worth £162m across their London branches in the 48 hours before the budget, and we represented a number of clients moving quickly to capitalise on motivated seller opportunities.

With the budget having now provided certainty on critical tax considerations, we have seen a significant increase in new enquiries. These are from both overseas and domestic buyers who are actively looking to buy or rent now, or putting plans in place to do so in Q1 of next year. Their budgets range from £4m - £25m, with 70% looking to spend more than £10m.

Enquiries from international clients looking to move to London include an American couple moving here to educate their young children, a British expat returning from Singapore for secondary schools, and an entrepreneur living in Europe who misses the buzz of London life.

Among the domestic buyers are a senior British banker who has been renting and is now ready to buy for the long term, and three separate entrepreneurs – one of whom is upgrading his London home and the other two who live outside London, but are spending more time in the city. 

Entrepreneurs account for approximately 50% of our clients, several of whom accelerated the sale of their business pre-budget ahead of capital gains tax increases – or will do so ahead of April 2025 – and are now looking to acquire a prime London home.

£5m+ homes being held back, but early access is possible

£5m+ homes being held back, but early access is possible

We are seeing a clear distinction between the availability of sub £5m and £5m + properties.

Whilst we have seen an increase in the number of sub £5m homes for sale this autumn, many sellers above £5m are holding their properties back for the spring market, which means a strategic and considered approach is key to opening doors in early 2025.

Below £5m, stock levels have increased through the autumn and there are currently 20% more properties for sale than this time last year. In this price bracket, property wealth usually makes up a significant part of a seller’s overall liquidity and they will often sell to facilitate a move up the ladder within London or relocation elsewhere.  

Many sellers in the £5m+ price bracket, however, are holding back their properties until spring, as their personal wealth levels tend to be higher and there is less urgency or financial need to sell. This financial flexibility means many are waiting in anticipation of  stronger buyer competition in the traditional spring selling window.

As we only represent buyers – and never sellers – our team are given exclusive access to new properties before they launch onto the open market, enabling our clients to secure early opportunities with first refusal. In some cases, a competitive price can be achieved ahead of an open market launch, and in others we advise allowing the property to come to the open market, when sellers’ expectations often adjust to more realistic pricing levels. In all cases, forward visibility is essential for clear decision making.

Pipeline of luxury new build sales is limited

Pipeline of luxury new build sales is limited

The opportunity to acquire large new build property in prime central London is increasingly limited, as the impact of Westminster Council’s planning rules restricting the size of new properties to no more than 200 sqm (approximately 2,150 sq ft) shapes the market.

People are often surprised to learn just how much of prime central London Westminster covers, from St John’s Wood, Marylebone and Mayfair, to parts of Knightsbridge and Belgravia. That’s a significant swathe of the city where there are no prospects for buying a large property besides those which already exist.

As a result of the reduced pipeline, new build homes accounted for just 9% of £5m+ sales this year and typically only 14% of luxury new build owners will sell their property within the first five years, so resale opportunities will remain few and far between. 

Whilst smaller properties tend to sell off market, the larger apartments usually sell much closer to completion when prospective buyers can physically walk the space. Once the final remaining larger units within super prime developments are fully sold, it will become much more difficult to find one. 

Understanding which properties within each development meet a search brief and being able to make strategic – and successful – direct approaches to owners of larger new build apartments, will be increasingly important for buyers. 

Appetite for refurbishments is returning

Appetite for refurbishments is returning

Properties requiring work have been shunned in recent years, largely due to the limited supply of labour and planning delays, causing nervousness around escalating costs and extended build programmes.

But as 2024 draws to a close, this aversion is now softening as construction costs have eased and architects, designers and builders are once again actively competing for business. We are now working with a number of clients who are open to doing work if the property or location merits the investment and effort, which was virtually unheard of last year.

We are also seeing sellers of unmodernised properties which have lingered on the market for some time, become more willing to accept discounts that realistically reflect the cost of the work required to bring the property up to scratch. This is especially the case with ex-rental properties, which currently account for approximately a third of homes for sale in prime central London - many of which have been rented for long periods and require considerable upgrading.

With more clarity on their finances following the budget, buyers are now having the confidence to make longer term decisions, such as whether to remain in and refurbish or extend their current property, or to sell and move up the ladder.

Tenant affordability limits landlords’ options

Tenant affordability limits landlords’ options

Despite a trend for landlords wanting to exit the market and sell up, many have failed to achieve their sales asking price and, rather than sell for less, are choosing to return to the rental market. Those going down this route will need to be very mindful of tenant vetting and selection with the Renters’ Rights Bill coming in next year, and we would be happy to discuss this further with any returning or new landlords to the market. 

As a result of more properties coming back to the rental market, tenants have more choice and, knowing they have options, we’re seeing push back on rent increases as a result. Many are reaching their affordability limit or tolerance, with the average tenant paying up to 40% of their disposable income on rent in many cases. 

Landlords are shouldering higher costs such as rising service charges – and they face a conundrum. 

They either renew their existing tenancy for little or no uplift in some cases, and keep a good quality and known tenant in place. Or they push for a more meaningful increase which may cause the current tenant to leave. This comes with the very real risk of only achieving the same price that their existing tenant is paying (or less) – but incurring re-let costs and a potential void period between tenancies, as well as welcoming a new tenant whose reliability is not yet proven. 

Tenant pushback is particularly prominent from those who have been in situ for shorter periods. Longer-term tenants who are enjoying a good rental experience are often more inclined to acknowledge that the market has climbed and accept a price rise, rather than go through the upheaval of moving.

Landlords therefore need to navigate the current climate carefully, including being wary of letting agents who are promising unrealistically high rents in order to win business. The key to this market is ensuring rents are maximised, but not at the risk of losing a good quality tenant to the detriment of the overall net yield. 

For 18 years, we have been trusted by individuals and families to provide exceptional property search, relocation and property management services.

Our award-winning team have successfully acquired more than 400 properties for clients and we manage a portfolio of more than 150 rental properties and private homes. Please get in touch if we can be of any assistance.

T: +44 (0)7244 4485

E: enquire@eccord.com

Tenant affordability limits landlords’ options