7th May 2024
10mins
A tricky anomaly is emerging in Prime Central London’s market: a glut of expensive new homes flooding the market is not being met with an equal number of high budget buyers to purchase them.
According to data from house price analyst LonRes the first three months of the year saw the highest ever volume of new £5m-plus central London listings it has ever recorded, up 20 per cent compared to the same period last year.
However the number of homes going under offer in the same period is down, year on year, by a resounding 43 per cent.
The reason for this drop off could come from estate agent Knight Frank. It observes the same uptick in new instructions, but said that the majority of its new buyers have budgets of £2m or less.
This means that while the number of offers made on homes priced between £750,000 and £2m is up six per cent compared to last year the number of offers on homes priced at £5m plus fell by six per cent, said the firm.
Camilla Dell, managing partner of Black Brick, said a burst of new instructions is to be expected during the spring market. “And I think that a lot of sellers held off after the mini budget, so there is a bit of a hangover from that, plus there are people who want to sell before the General Election.”
When supply exceeds demand the result buyers are in a great position to strike a good deal.
“Potentially what it means is room to negotiate and an opportunity to buy well,” said Dell. “We recently acted for a client on the purchase of a freehold home in prime Knightsbridge and saved them £3,500,000, the equivalent of almost 26% from the original asking price.”
How amenable a seller will be to cutting their price will depend on many factors – their personal circumstances, the quality of the property, and its location.
New research by Coutts, the private bank, found that homes in prime London currently sell for 8.9 per cent below their asking price, with price cutting at its most rife in South Kensington. A resounding 94 per cent of homes in the neighbourhood sold at a discount compared to their original list price. The average discount was 12.4 per cent.
Chelsea is also ripe territory for price cutting, with nine in ten homes being sold at an average discount of 10.5 per cent. And even Knightsbridge and Belgravia are not immune to discounting, with 86 per cent of homes seeing prices cut (by an average 12.3 per cent).
Areas where price cutting is less common are on the fringes of prime London. In King’s Cross and Islington one in three buyers have been able to negotiate a price cut of an average 6.4 per cent. And around half of buyers in Hammersmith & Chiswick succeeded in buying for an average of 4.5 per cent below asking price.
Top end buyers are thin on the ground right now, and part of the reason is the UK’s slightly shaky economic position.
The battle to reduce inflation took a hit last month after the latest figures showed rates had slowed slightly less than expected in March (down to 3.2 per cent, against a projected 3.1 per cent).
This news prompted economists and investors to rapidly revise their forecasts for early interest rate cuts. City analysts who had until recently been predicting up to seven base rate cuts this year, now think it will be more like two or three, with the first reduction expected to take place in August.
Then, late last month, a clutch of lenders including Barclays, HSBC, and NatWest, confirmed they would be increasing their lending rates, piling further pressure on home buyers and remortgagers.
In the most literal sense, interest rates make only a marginal difference in Prime Central London where the majority of buyers will be paying cash. Last year almost 70 per cent of Black Brick’s buyers did not require a mortgage.
“But I think that it does affect sentiment, and this is a very discretionary market,” said Dell.
Spring is traditionally the time when buyers return to the market and this year those that have ventured out appear to be going all out in search of a forever home.
According to property portal Rightmove – the number of sales being agreed across the mainstream UK market is currently 13 per cent higher than at this time last year. This growth is primarily being driven by sales of detached houses, currently running 17 per cent higher than at the same last year.
Meanwhile the Royal Institution of Chartered Surveyors reports that buyer demand hit a four year high this year, based on the number of new buyer enquiries around the country.
Beyond prime central London Dell said many buyers’ strategy is to take as few steps as possible to reach the top of the property ladder.
“Moving costs and Stamp Duty is so high that we see people who are moving straight from a rental, or from a one-bedroom flat, into a big family home to avoid the middle steps,” she said. “There is strong demand for big family homes in suburban areas. For buyers with budgets up to £4 million we are seeing strong demand for homes in West and South Hampstead”.
During the pandemic it was country and coastal locations which saw the strongest price growth, but that trend has now been reversed.
Indeed Nationwide’s March House Price Index revealed that over the past three months average sale prices across the British capital jumped by 1.6 per cent – the only UK region to see any price growth.
Historically London has a habit of leading the country out of real estate downturns – after the financial crisis of 2007 and 2008 it was overseas buyers flocking to Prime Central London who kickstarted the market.
Black Brick’s view is that while prices are gently rising, London’s market is a long way from another boom.
“The feedback I have from estate agents is that there are not enough serious buyers,” said Tom Kain, a partner at Black Brick. “There are still transactions happening, of course, but the sentiment on the coal face is that things are quite slow.”
Black Brick, meanwhile, is busy with a range of clients, including Americans looking for second homes, with budgets of anything from around £1.5m to £7m. They are seemingly undeterred by issues like the looming General Election, high interest rates, and the prospect of the dismantling of the Non Dom system.
“They love London because they can hop over to so many places in Europe, they speak the language, and they have historical ties,” said Kain.
They are also aware that London offers an outstanding quality of life. Savills’ annual Resilient Cities Index recently ranked the city top in Europe, and only topped by New York and Tokyo globally.
The index analyses the economies of 90 cities based on a range of factors including tech capabilities, knowledge economy, education, and environmental credentials.
Other Black Brick clients range from nervous first time buyers seeking a helping hand, to ultra-high net worth buyers from Europe and the Middle East looking to add a London home to their property portfolios.
While London is seeing a gentle return to the black, parts of Devon have had an outstanding year according to the latest Land Registry figures.
Prices in South Hams have increased by almost eight per cent year on year, while East Devon has seen prices jump 6.7 per cent in the same period, as the drive to relocate from major cities continues.
New research by Get Agent drilled further into these figures, and found that South Ham’s alpha location, the charming yachting village of Salcombe, is now one of only two seaside towns in the UK where average prices exceed £1m (the other is Sandbanks in Dorset).
The average property price in Salcombe is now almost £1.4m, while prices in nearby Dartmouth have topped £860,000.
Rupert Stephenson, of Black Brick’s newly established Country & Coast Department said that despite price growth buyers realise that Devon still represents excellent value compared to the Home Counties and London and are making long term plans for a lifechange. “Buyers are looking for somewhere they can use for holidays for a few years but in time they want to move down and make it their main home,” he said.
In Cornwall price growth has been more muted over the past year, although the start of the spring market has seen a trickle of new buyers coming out of the woodwork. And Black Brick’s Anna Sharp said that she is seeing some spectacular properties on offer: “The properties which are available are world class, in terms of quality and setting. It is the best range of properties I have ever seen in my career.”
Right now Sharp sees Cornwall as a buyers’ market although how long it will last remains to be seen. “We are starting to experience competitive bidding once again in the south west,” she said.
Cornwall house hunters are also getting more youthful – the average age of Sharp’s current clients is just 30 – and she credits the region’s improving infrastructure and communications, coupled with new work patterns for encouraging relocators. “All of them work from home,” she said.
Our clients wanted to buy a freehold block of flats in East London, which could double as both an investment and a place for them to live.
With a search area which stretched from Islington to Hackney and a budget of anywhere between £2m and £6m.
After an extensive search we found them a unique opportunity on Aberdeen Road, Highbury. The freehold block contained five flats, all let, and it had been in the same ownership since the 1970s. Our clients loved the popular residential location, close to Clissold Park, and fashionable Stoke Newington. And although the property was not on the open market, we managed to source it for our clients for a fraction over £2m. This works out at less than £700 per square foot, a highly competitive price for this popular area.
Spring has sprung and, appropriately enough, gardens are the focus of the latest episode of the Black Brick podcast, Finding Perfect Property.
Camilla Dell interviews the fascinating landscape gardener Randle Siddeley, Lord Kenilworth, who has spent almost five decades creating some of the most beautiful outside spaces in the world. He discusses how he took refuge in gardening as a dyslexic schoolboy, and explains what makes the perfect garden.
Click here to watch on YouTube.
Click here to listen on Spotify.
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