Happy Lunar New Year…and welcome to the year of the snake!
Will the property market shed its skin?
The snake’s traits are insight, intelligence and resilience. She is also considered the most tenacious of the 12 zodiac animals. The skin shed by the snake is called the ‘dragon’s coat’ (longyi 龍衣), a symbol of both good luck and rebirth.
For those who follow the signs, the turn of a calendar page signals renewal. They prepare for the new season by giving up something, like a dragon losing its old coat, letting go of the past. They make room in the new year for new prospects.
The past year in the UK property market was clouded by uncertainty. For this year and next, in Prime Central London, the market that Longview Advisors focuses on the most, forecasts for price growth are not hugely optimistic.
However, for buyers, with snake-like perseverance and proper planning, it’s a good time to seek growth opportunities.
Starts, stops and the October surprise
LonRes recorded an abundance of deals in October 2024, with volume 75% higher than the period pre-pandemic (2017-2019) average for the month. Indeed, they were the most in any October since their records began 25 years ago. Transactions for the final quarter were up 20% over the same period in 2023, despite a more dormant November and December. Sales volumes for the full year finished 4.9% up on 2023 and 10.0% above the pre-pandemic average.
That year-end ‘bounce’ may be attributed to the sense of post-election and ‑budget certainty.
Anecdotal evidence and sentiment always have a place in predicting what’s next. The big selling agents are forecasting a range of price movements, but none is overly optimistic, with most expecting negligible price growth over the short term.
LonRes aggregates the estimates from the big players and from the independent Office of Budget Responsibility, which came in low at 1.1%. The most optimistic was only 4%. Savills actually predicts a fall of 4% for 2025 and a pessimistic CAGR (1.8%), which is below the Bank of England’s inflation target, for the next five years.
Headline prices don’t tell the whole story: time on the market and discounts achieved can help buyers understand the current context. According to LonRes, two underlying trends have been stable throughout 2024:
‘The average discount to asking price across prime London was 8.3% in 2024, a slight increase from the 8.1% recorded in 2023. Average time on the market also saw a small rise, from 167 days in 2023 to 169 in 2024.’
London calling
Five years ago, the Covid exodus has shifted buying patterns. Outside London, the high-end property markets of the Home Counties (Essex, Hertfordshire, Buckinghamshire, Oxfordshire, Berkshire, Surrey, Kent, West Sussex and East Sussex) were very much in demand among those seeking more space.
However, Investec reports average prices in the £1-million-plus sector across the Home Counties fell by 9% in 2024. That translates to buyers achieving significant price reductions on higher-value listings.
Meanwhile, back in town, major employers are mandating a return to the office for most staff. Top of the list of requirements for many of our clients is a desire to be near their workplace in central London.
What is selling in the £5-million-plus range? Here’s a view through that particular window:
- London’s £5m-plus market picked up in the final quarter of 2024 after a slower first nine months of the year, according to analysis from Savills. Overall, the number of £5m-plus sales (442) was 16% down annually.
- Almost two-thirds of London’s sales at that level in 2024 were houses rather than flats. The figure, its highest since 2021 indicates overseas buyers are back post-Covid.
- Despite their stated preference for turn-key properties, London new-builds accounted for the lowest proportion of total £5mn+ sales in 2024 than in any year since 2011.
And prices are certainly down. Average sold prices across London’s most prestigious neighbourhoods are still some 20% below their peak a decade ago according to Savills Prime London Index Q4 2024.
10,000 millionaires can’t be wrong…?
The headline figure, produced by New World Wealth for British advisers Henley & Partners, claiming that the net migration of millionaires from the UK was 10,800 in 2024 is part of a story about the economic impact of losing this important demographic.
The policy changes introduced in the October budget, which raised capital-gains tax rates, broadened the reach of inheritance duty and abolished the non-domiciled status that granted favourable treatment to temporary foreign residents are certainly real considerations for high-net-worth families.
This week’s hints of a row-back by Chancellor Rachel Reeves notwithstanding, the reality is that below the headlines the situation is not so dramatic. Matthew Brooker, writing for Bloomberg, reminds us that New World’s figure, while conservative, is only about two percent of the estimated 602,500 high-net-worth individuals (defined as those with investable assets of at least $1 million) in the UK.
Yes, there was a flurry of activity ahead of October’s budget and since then clients and their advisers are working to meet deadlines of the tax year in April. Yet many clients are taking their time and a measured approach to their affairs over the longer term.
This includes deciding where and how they want to live.
Financial cycles churn and property prices rise and fall. For buyers, the predictions from estate agents weigh less than their own financial and life-stage circumstances. Capital allocation pre- or post-liquidity event, for example, or seeking stability while the kids are still in school must be weighed.
We saw in 2024 some long-awaited property reforms and new regulations taking effect, with more significant ones on the way this year, most of which are too complex for any mere mortal to understand or predict. That’s why it’s always important to have legal advice. Not just a solicitor but a good solicitor.
What can overseas buyers expect?
Scrolling through property videos on social media on Sunday night looking for an ideal home is considered recreation for many. The ease of posting and the proliferation of digital channels gives buyers the impression of overwhelming choice. The technology creates an illusion that all the information is at one’s fingertips.
The reality is that many featured listings are more like dead stock. Not all properties are priced correctly and therefore are sitting idle as inventory.
Furthermore, on the ground the market is highly fragmented. Every London district is a micro-market, represented by a plethora of local estate agents. Each one might be a specialist in a particular patch. But the actual time required to connect with numerous agents—even if you have a tight short list—can be a considerable investment.
Again, what’s visible on the surface is not a true picture. Increasingly, especially at the higher price range, desirable properties are only available off market. At Longview the number of off-market acquisitions has risen from a typical 30 percent to 70 percent in the last two years.
That’s why a buying agent can help. Saving time, effort and providing you the confidence you need to make the right move.
Reading the signs
This year may be the beginning of an upswing, or more of the same for the London property market. Perhaps you don’t put much stock in what the zodiac signs say. Logic and data are more your thing.
But statistics are only a snapshot of the past. The truth is no one knows for certain what happens next.
London will always be an attractive market for buyers, both to live and invest.
The best strategy is to be prepared. Prime Central London is considered competitive, so even as you begin your search, seek out the best advisers and draw upon their specialised expertise. Make sure your finances and documentation are up to date and available so you can be positioned as a preferred buyer.
To find out more how an independent advisor can help make the most of this year and next, get in touch with Longview.
