Tariff Wars and London Property
At the time of writing, the S&P 500 is down 8% since Trump’s tariff announcements at the start of April.
While financial markets have reacted negatively, the long-term implications for London property are unclear. After the last property downturn during the 2007-2009 financial crisis, London house prices surged until 2014 as international buyers viewed London as a safe haven for capital. In the event of a similar financial shock, we wouldn’t expect history to repeat itself. London now has significantly higher frictional costs. The top rate of Stamp Duty has risen to 18.6% while recent non-dom tax changes are deterring some from relocating to the UK.
Colleen Babock of Rightmove commented that London “is likely to see greater knock-on effects from US tariffs than the rest of Great Britain”. We tend to agree with this view as most of our clients have exposure to equity markets.
Uptick in US Interest
In spite of this economic turbulence, we are seeing a significant increase in inquiries and instructions from US buyers. As Sterling has been low against the Dollar for a number of years, this trend appears to be driven by other factors.
Unless they are relocating to the UK permanently, our US clients typically want to be in the heart of the action – even if it means sacrificing space for location. Interestingly, most comment on how safe London feels relative to major US cities. While we do have some concerning crime trends (especially rampant phone theft), it does put some sensationalist media coverage into perspective. The influx of US buyers may help support current price levels but talk that it may lead to house price growth seems overstated. There are currently fewer buyers from other regions such as Hong Kong.
Overvaluations abound
Recently the FT reported how a ‘frenzy of overvaluations’ is preventing Prime Central London from being a functioning market. It cited the sale of Regent’s Park’s The Holme at £138.9mn which initially listed for £250mn in March 2023.
In some respects we are fortunate that we do not need to make a market and can simply tell clients what we think a property is worth based on objective data. Selling agents can’t always operate in this manner to secure clients.
On a recent viewing in Notting Hill we viewed a well-presented flat. However the wider building had a crumbling facade and issues with the roof and guttering. The freeholder had no plans to carry out essential repairs and it became clear the selling agent had not broached this issue with their client. The strategy seemed to be finding a buyer who would remain oblivious to the conspicuous issues with the wider building and have a very relaxed surveyor!
Anecdotally, we are finding fair value quicker to come by in other markets such as Islington and Clerkenwell. Properties still come onto the market at unrealistic levels but sellers typically lower their expectations far more quickly.
At a time of volatile valuations, buyers should be particularly cautious when presented with achievable ‘discounts’ on off market property which may be 30% overvalued.
Motivated vendors the key
Before taking on a new client, we first establish they are genuinely looking to buy in the short-medium term. We only work with retained clients, and charging a fee establishes a level of commitment and trust on both sides. It’s important our buyers are working with serious sellers with a similar mindset. A crucial part of our role is vetting the seller’s circumstances before starting negotiations.
Our last five transactions have all involved sellers under some genuine pressure to transact – from landlords exiting the market to families relocating ahead of school application deadlines. All negotiations concluded in 2-3 working days with sellers coming down quickly in price quickly in exchange for the security of an organised and well-briefed buyer. In one case, the selling agent appreciated we had thoroughly debriefed our clients on the downsides of the property before offering, mitigating the chance of a fall through at a later date.
