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Spring 2024: Market Update

Beware price anchoring

Price anchoring is when a consumer uses the first number (the ‘anchor’) they encounter as a reference point to make decisions. In the case of property, this is usually the asking price.

We recently advised on a property which had already had 3 price reductions.  Despite the latest asking price being 22% below the initial listing, we still couldn’t recommend an offer near that figure.

This underlines the importance of never basing on offer on how much of a ‘discount’ you can secure and establishing your own ‘anchor’ based on data. This approach has (so far!) meant we have not had a single bank surveyor’s down valuation since starting Perrygate in 2018.

Disregarding the asking price is especially important in Prime Central London where some sellers are unmotivated and testing the waters at unrealistic levels. This is especially prevalent off market at lower budget levels. Meanwhile, on the open market, 58% of houses in Chelsea take more than 6 months to sell. That is a lot of time properties are being marketed at 5%-25% more than what they are worth!

Time on the Market: Flats & Houses in Chelsea (Source: LonRes)

Strong narratives based on weak data

LonRes reports that while the stock of homes across Prime Central London is steadily increasing, values based on average £ per sq ft have fallen 7.8% on an annual basis, 1.1% below were they were a decade ago.

However, you can not go a week without reading a press release suggesting that Prime Central London is ‘bottoming out’ or at an ‘inflection point’. Some neighbourhoods in North and East London have performed well in the past decade but most of Prime Central London has been broadly flat.

London property will almost inevitably go on a strong run at some point but nobody knows when.

Knightsbridge – Undervalued or underwhelming?

Knightsbridge has underperformed other parts of Prime Central London over the past few years leading to suggestions it is now good value.

We would advise caution to anyone considering the area who has not lived there. Brompton Road suffers from high noise and air pollution. The high street is not as well presented as Marylebone High Street or Kings Road, to name just two.

We feel there is better value elsewhere.

The (gradual) return of the city

In 2020 we were carrying out viewings when much of central London was a ghost town. Many feared ‘working from home’ would permanently hollow out cities.  To anyone who has had the misfortune to be at Liverpool Street station at 6pm, that seems a very long-time ago!

Things are still not quite back to normal. Hybrid working looks like a permanent fixture and commuter numbers are still behind pre-pandemic levels but London is noticeably busier. Two years after opening, The Elizabeth Line is already the UK’s busiest railway line and the UK’s ten busiest stations are all in London.

Meanwhile, institutional investors are betting billions that demand for best-in-class office space will remain high.  The City of London’s has a busy pipeline of skyscraper applications and AXA recently announced a 95% occupancy rate of 22 Bishopsgate, the UK’s tallest commercial building.

Away from London, Manchester has plans to build the tallest residential building in Western Europe.

This doesn’t mean urban residential property will perform strongly but it’s reassuring to see confidence in city centres.

We hope you found our quarterly review useful. If you are looking to buy in London or simply have any general questions about the market, please don’t hesitate to get in touch at [email protected] or +44(0)208 0880 522.