A buoyant market. But for how long?
London’s post-lockdown market has been significantly busier than we (and the majority of housing analysts!) expected.
Land Registry data shows market activity towards the end of the summer was stronger than in 2019 and this tallies with our experience. With travel restrictions still in place, the majority of our new retained clients are domestic buyers but we are still seeing strong demand from East Asia. We are currently acting for clients purchasing remotely from Hong Kong and Singapore.
Although the market is relatively busy, it is certainly possible to secure healthy discounts. We have recently taken two properties off the market for less than their previous sold prices, 2 and 3 years ago respectively. In both cases, matching our clients with the right, motivated vendor was key to completing the transaction in a timely manner. However excessive discounts are unlikely in the current market. Low interest rates (with talk of negative interest rates from the Bank of England), a lack of distressed vendors and the SDLT holiday are all giving some support to prices.
Pleasingly for our clients, there is a strong supply of new properties giving us plentiful comparables to work with. It remains to be seen whether this trend will last towards Christmas. Anecdotally, we have detected a softening of the market over the last few weeks so we will see if this translates into reduced sales activity.
SDLT deadlines – Closer than you think!
The SDLT holiday will end on March 31st, 2021. For non-UK tax residents this deadline coincides with the introduction of an additional levy on UK home purchases.
Whilst this date may seem a long way off, good solicitors may look to stop taking on new business towards the year’s end to cope with what will likely be a hectic period. Local authority searches and mortgage offers may also take longer to process. For all these reasons, we recommend buyers should be looking to take a property off the market no later than early December. Now more than ever, using a cheap conveyancing firm is a false economy which could turn into an expensive mistake.
Privately, we do not think an extension of the SDLT holiday is beyond the realms of possibility but we should certainly assume the deadline is fixed!
All eyes on the rental market
While the sales market has been relatively stable, the rental market is proving far more turbulent.
RICS September report stated:
“London now stands out as the only area in which a negative trend in tenant demand was cited in September.”
This is unsurprising given Zone 1’s dependence on international students, short-term tourist lets and workers prioritising a quick daily commute. Demand from all these groups has fallen significantly.
With no current evidence of a major price correction, investors and home buyers wishing to proceed this year, will have to accept properties with lower potential yields. The key question is where will rents stabilise. We can’t answer that but are ensuring our rental estimates are even more conservative than usual!
The importance of early due diligence
As a buying agent our main goal is always ensuring the successful conclusion of a purchase. One third of agreed sales in the UK collapse and only half of properties listed in London achieve a sale. The due diligence we undertake on any property prior to making an offer means we have a far higher success rate. If our preliminary inquiries about a property aren’t satisfied, we recommend a client moves on regardless if the property/price is tempting.
Recent issues identified include unsatisfactory responses regarding a development’s cladding which we knew would concern our solicitors. Another was when a vendor was ready to agree to a sale but it would have meant becoming part of a complex chain liable to collapse. Finally we noticed structural issues with another property. A quick call to a surveyor confirmed this would lead to red flags being raised during a building survey. In all instances, we advised clients mindful of the looming SDLT deadlines to move on.
Although a buying agent defers to a solicitor and surveyor’s professional opinion, these examples illustrate the crucial role we can play in mitigating potential issues and increasing the likelihood of a smooth transaction.
Beyond Prime Central London
Whilst we are not seeing strong evidence of a London exodus to the countryside, we are seeing a shift in some search preferences. Lockdown has caused clients to reassess their needs and the lack of a daily commute for many is making areas with a village feel such as Hampstead, Chiswick and Stoke Newington more appealing. Think a spacious 2/3 bed flat in Barnsbury instead of a luxury 1 bed in The City.
Many commentators announcing the death of London forget that compared to other global cities, we are one of the greenest global cities. Clients looking for a balance of urbanity and nature don’t need to look as far as they would in New York or Hong Kong.
If you are looking to retain a buying agent to secure a London purchase before next year’s SDLT deadlines, we’d be delighted to discuss your requirements. Contact us today for a free consultation at [email protected] or 0208 0880 522.