Autumn Market Update

Autumn Market Update

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.

London buying agent

July Market Update

London Property Market Update: July 2020

The property market is coming back to life. Our diary is full with viewings again and we are submitting offers on behalf of clients on a weekly basis. 

We are still in early stages of the post-lockdown housing market but here are our initial thoughts.

A Fragmented Market 

There is a wide range of sentiment from both buyers and sellers. We are finding common ground on some purchases but not all. In a quickly changing market, it’s important that buyers are patient and more opportunities are likely to present themselves towards the Autumn. 

In the current circumstances, different types of property are also faring very differently. On one hand, competition for best-in-class properties on prime residential streets (especially with sizeable gardens or terraces) is strong. We have seen one property with a very large garden attract multiple offers above asking price. 

On the other hand, significant discounts can be achieved on new-build flats, especially in residential towers. There are good opportunities for investors looking to make bulk purchases, particularly if they are buying 6 or more units and thereby avoiding residential stamp duty rates.  

A buying agent can play a vital role in navigating what is becoming an increasingly complex market. A great deal of our time is spent matching buyers with not just the right properties, but the right vendors who are also looking to promptly exchange contracts. We foresee the market will continue to be fragmented for the remainder of 2019 as more economic news starts to filter through. 

Beware Rising Asking Prices

Rightmove has reported asking prices have risen to an all-time high. We have noticed properties which failed to sell throughout 2019 relisting at significantly higher prices – sometimes up to 10% higher. This may be a ploy to let buyers achieve an impressive sounding discount while the vendor secures the figure they want. As always, an asking price should never guide an offer. 

SDLT Relief – Tread with caution 

The government’s announcement to reduce stamp duty for all purchases up to £500,000 has certainly boosted activity at the lower end of the market. Until March 31st 2021 there will be no basic rate of SDLT up to the value of £500,000. Whether this translates into more completed sales remains to be seen. 

The full economic impact of coronavirus is yet to be seen and we suggest buyers do not place too much importance on this temporary relief. This is especially true in the central London market where the £500,000 relief typically covers a smaller amount of the final sale price. Buyers should focus on achieving an appropriate discount to reflect the current situation. 

Strong Demand from Hong Kong 

The Financial Times reports that the number of Hong Kongese looking to buy in London is increasing in the wake of political instability in the region. This certainly reflects our experience and we are currently working with several clients looking to buy remotely. The British Government’s recent announcement to provide a path to citizenship to all BNO holders, favourable exchange rates and the relative affordability of London property are all driving interest. 

If you are looking for assistance with your property search, please get in touch today on 0208 0880 0552 or [email protected] We would be delighted to discuss what we are seeing in the market on a daily basis.  

June Market Update

June Market Update

As we enter June and lockdown measures are eased, the property market is slowly shifting into gear. We are booking in viewings again, where permitted and gradually being presented with more opportunities.

Nationwide has recorded  a nationwide 1.7% fall in house prices in May compared to the previous month. However this is based off extremely limited data and information on sales completed after lockdown will take some time to filter through. We stand by our March predictions for the market and the majority of our clients are taking the same view. At present, no clients we are working with are prepared to offer pre-covid levels. 

Selling agents are being understandably bullish but we have already been quoted 10% discounts on several interesting properties. At the same time,  other properties are coming back onto the market at prices higher than they failed to sell at in 2019. The market for the rest of 2020 will be increasingly complex and we see sale prices being agreed at the widest range for a long-time. Some (but not many) buyers will inevitably let emotions rule and pay Feb 2020 prices but long-term they will be in the minority. 

As we have previously written, buying with a 5-10 year time horizon should be the minimum. Historically London has strongly recovered from market corrections and quickly finds new highs.  The longer a buyer’s time horizon, the more they can insulate themselves against the risk of COVID whilst simultaneously taking advantage of historic long-term interest rates. More and more of our inquiries are from buyers who could pay cash but are looking to ‘lock-in’ 5-10 year fixed rates. As before coronavirus, international demand is still there. Pound sterling’s favourable exchange rates against the $ and other major currencies will support demand in Prime Central London and other neighbourhoods with excellent long-term prospects. Coronavirus will change many things but it won’t stop London being one of the best cities in the world to live or invest in. 

Now more than ever a buying agent can help clients navigate an increasingly complex marketplace. Identifying a combination of motivated, pragmatic vendors and best in class properties – whether that be off market or through traditional channels – is more demanding than ever. If you would like to discuss your property search with Alex today, please get in touch.  


Perrygate is a registered buying agent and not a financial advisor. Anyone considering purchasing UK property must undertake their own due diligence. The opinions expressed in this and other articles are the personal opinions of staff at Perrygate and do not constitute investment advice. The value of an investment may go up or down. Please see our Terms of Use  for more information

 

Prime Central London

Coronavirus and the London Property Market

CORONAVIRUS & LONDON's PROPERTY MARKET

Published 24th March 2020

Whilst the coronavirus pandemic is a human crisis first and foremost, it would be amiss to not give our initial thoughts on the short and longer term implications for London’s property market. 

Now more than ever, clients need an honest assessment of the market.  Perrygate will continue to outline both the potential up and downside of any purchase and help our clients achieve the best possible terms. 

What was happening to the market before the pandemic? 

Confidence and activity were returning throughout January and February.  The general election result gave many the confidence to proceed with their purchase and the majority thought ongoing uncertainty surrounding Brexit negotiations was ‘priced in’. Competitive bidding and sealed bids were making a return for ‘best in class’ properties.

It’s safe to say, that’s no longer the case! 

And Now? 

The property market has come to a virtual stand still. Estate agents aren’t conducting viewings whilst lenders and surveyors are not carrying out valuations in person. 

We have some client purchases in the hands of solicitors which made it beyond the surveying and financing stages before lockdown. We are progressing these sales towards exchange of contracts with our clients in control of the process. 

One side effect of the lockdown is Airbnb properties flooding the regular rental market. This is causing a short-term decline in rental asking prices but whether you can carry out a viewing is another question entirely. 

Has COVID-19 already affected house prices? 

Due to the lockdown, the impact of COVID-19 is minimal – there are nowhere near enough transactions to make a valid assessment of the market. This will remain the case until we start seeing significant transactional data coming through. 

Property is an illiquid asset and house prices are not subject to the day to day swings of the financial markets. Once the market reopens, there will be a period of ‘price discovery’ as buyers and vendors try to establish what is a fair price. Banks will also reevaluate what is an acceptable level of risk.  We expect this to suppress transaction volumes for the first few months after lockdown.  

What will happen to house prices?

In short, nobody knows the extent of the economic damage COVID-19 will cause and the subsequent effect on the market. Will society only return to normal following a long wait for a vaccine or will things improve gradually with the introduction of anti-viral drugs and immunity tests? How much money will central banks inject into the economy? Will the government introduce a SDLT holiday to protect house prices? 

With that said, here is our personal take on London’s property market in 2020. 

     Potential Downside: 

  • higher unemployment levels / firms reducing salaries – this could lower yields which put downward pressure on prices 
  • an uncertain lending environment – will banks impose stricter affordability checks and be more conservative in their valuations? 
  • economic losses from the ongoing lockdown
  • future losses to the economy as the world recovers from the virus – the IMF and other respected bodies are predicting the worst economic downturn since The Great Depression. Even in a best case scenario, the economic impact will be significant and talk of a V-shaped recovery seems optimistic. 
  • potentially higher income tax rates as the government looks to address higher debt levels
  • higher death rates, divorce rates and personal debt which will all increase the number of motivated sellers

     Potential Upside:

  • historically low interest rates unlikely to increase in the short-term 
  • mortgage holidays alleviate immediate pressure on landlords and homeowners
  • the majority of homeowners in prime central London are not heavily leveraged or own their property outright so we expect this to limit the number of distressed sellers
  • in an uncertain lending environment, cash buyers or those looking to buy at a maximum 60% LTV will likely find they have more negotiation leverage than in previous years. 
  • overseas buyers can benefit from favourable exchange rates against the £.  Pound sterling is currently trading at $1.25 USD
If we weigh up all the above and assume asking prices will be at February 2020 levels when the market reopens, we see more downside than upside throughout the rest of the year. Even if there is limited available stock, we believe buyers will have the upper-hand. It will likely take the majority of vendors and selling agents a while to come round to this view.  

What should I bear in mind if I’m looking to buy in London? 

After the lockdown, we believe buyers should be looking to secure a discount to reflect the additional risk.

Now more than ever, any purchase should be made with a time horizon of at least 5 years. With the current uncertainty, it makes even less sense to be paying SDLT twice – especially if you are an overseas buyer looking to avoid the SDLT increase in April 2021. 

Interest rates are now at historic lows and accessing capital is cheaper than ever. Many will see a softer market as an opportunity to secure their dream home on a long fixed-rate mortgage. 

We will work our hardest to secure any property for the best price and buyers should be taking a long-term view of how their investment will perform throughout the 2020s, not 2020! Historically, central London property has always been one of the safest investment classes with strong capital appreciation. 

Now more than ever, we believe our 6 month retainer period gives clients time to assess the market and act accordingly.

There will certainly be excellent buying opportunities in 2020 and 2021 where buyers will have significant negotiation leverage. As ever, finding the right property and motivated vendors will be key. 

If you would like to discuss a future or ongoing property purchase in London, please get in touch with us today for a free consultation. 

Perrygate is a registered buying agent and not a financial advisor. Anyone considering purchasing UK property must undertake their own due diligence. The opinions expressed in this and other articles are the personal opinions of staff at Perrygate and do not constitute investment advice. The value of an investment may go up or down. Please see our Terms of Use  for more information

London Budget 2020: London Property

2020 Budget Reaction

2020 BUDGET REACTION:
KEY TAKEAWAYS FOR LONDON'S PROPERTY MARKET

Wednesday’s 2020 Budget unsurprisingly focused on the coronavirus pandemic. This is a significant black swan event and warrants a more detailed article of its own which will follow shortly. For today we will simply summarise the key takeaways for the London market.

Interest Rate Cut

Before the budget, the Bank of England announced an emergency cut in the base interest rate from 0.75% to 0.25% – back to historically low levels. Whilst this measure has been introduced as a fiscal stimulus to address the economic fallout from COVID-19, it does of course make capital cheaper than ever for everyone, not just business. This ultra-low interest rate environment combined with the lack of highly leveraged home owners in prime central London does further reduce any immediate downward pressure on prices.

New Overseas Buyer Stamp Duty 

We have been advising overseas clients on this anticipated extra surcharge for some time. The key questions were always how much would the rate be and when would it be introduced. We now know the additional rate will be 2% (not the 3% many had anticipated). More importantly the charge will be introduced in April 2021 – an introduction this late was one of the most best potential outcomes we were advising clients on. 

We are not surprised the government is unwilling to compromise a stable source of income at a time when significant funding is required to address COVID-19. We are expecting the number of overseas buyers to increase this year as many look to buy before the deadline, although many will certainly be looking to avoid travel and buy remotely. 

Whilst many overseas buyers will be keen to secure a purchase before the April 2021, it is worth remembering that most major global cities already have a similar tax in place. For context, overseas buyers in Hong Kong have to be a rate of 33.3% of the purchase price and HK’s property market is significantly more expensive than London’s. Furthermore many overseas buyers will still be able to offset this additional tax against favourable exchange rates. Even accounting for the ‘second home’ SDLT rate which could be added to this rate for many international buyers, London will still rank behind many global cities for transaction costs. Saying that, we do feel the ‘super prime’ (£10m+) end of the market will most likely see a reduction in prices as it is dominated by overseas buyers who will simply look to pass these costs on to vendors. 

Cladding 

Away from these major announcements, it was good to see Chancellor Rishi Sunak announce a £1bn cladding removal fund and pledge the government will “make sure that all unsafe combustible cladding will be removed from every private and social residential building above 18 metres”.  

First-time Buyers out in the cold? 

First-time buyers may have expected more help from the government but there was no introduction of a mooted first-time buyers discount. In our opinion, the current ‘Help to Buy Scheme’ is fundamentally flawed and benefits major developers more than first-time buyers. Many new builds eligible for this scheme in London are 5-15% overvalued and buyers are putting themselves at a higher risk of ending up in negative equity. Service charges often represent poor value and the lease terms can be rushed and problematic. Our recent purchases for first-time buyers have largely been period property purchases with far better appreciation prospects and more secure forms of tenure. 

If you would to discuss your London property search with Perrygate, contact us today.