Article written by Jo Eccles, founder and Managing Director of Eccord, which is our partner on Miolo Adviser, our private client engagement platform. Miolo advances the model for the acquisition and management of advisers across wealth management, using technology to personalise matching professional advisers based on suitability in addition to expertise.
“What’s really happening in the London property market?” is a question I am asked by every client, private banker and friend I meet. And there is no straight answer. The prime central London property market is arguably more fragmented than we have seen for years – and knowing how to navigate it is more challenging than ever. These are some of the key themes we’re seeing this spring.
Focus on best-in-class homes
The divergence between best-in-class properties and ‘the rest’ is acute. Best-in-class properties are selling quickly, attracting multiple bids and over asking price offers. We recently fought off seven competing buyers to secure a trophy house within walking distance of one of Highgate’s best schools for a banker client, showing the strength of appetite for the most in-demand properties. Another of our landlord clients, a British family office whose portfolio of super prime rental properties we manage, sold a house in their rental portfolio in Mayfair for just under £50m.
Conversely, mid-standard properties are sitting on the market for prolonged periods of time – and will only sell if the seller is prepared to reduce the price. Many aren’t and can afford not to, opting instead to wait until conditions improve.
Stand-off between buyers and sellers
While top prices are being paid for genuine best in class properties, there is a disconnect between buyer and seller price expectations. Overall, buyers are securing smaller discounts in prime central London than they might have expected considering the wider economic context. This is because so many sellers are discretionary and can hold out for the price they want, withdraw their property, or turn to the strong rental market in the short term.
A significant proportion of properties for sale in wealthy neighbourhoods such as Chelsea and Kensington are surplus to requirements, prompting sellers to consolidate their assets, including selling properties once used as a pied a terre or London base but no longer required. Whilst sellers are committed to sell, many will only proceed at a price that makes sense for them, meaning large discounts are not being achieved.
Landlords streamline portfolios
The flat market in prime central London (sub £3 million) is more vulnerable to the impact of higher mortgage rates and job uncertainty. Rents are high but net yields remain low, impacted by greater regulation, rising maintenance and repair costs – and increasingly demanding tenants. This pressure on yields, combined with several years of weak capital growth, is driving many landlords to seek valuations with a view to selling in the next 12 – 24 months.
Landlords remain very cost conscious, having faced over the winter months rising repair costs, issues with damp and mould – caused by high utility bills and tenants opening their windows less – and greater demands from tenants who are spending more time at home and have higher expectations for the smooth running of their rental property.
We believe capital growth for mid-market flats will remain limited over the next three years and this is playing into the decisions by individual landlords and family offices to consolidate their assets, deleverage and invest elsewhere.
Buyers shun refurbishment projects
Major refurbishment projects are out of favour with buyers, who are being deterred by delays to build schedules, labour shortages and 30% higher construction costs. Premiums are therefore being paid for genuine turnkey properties in return for the certainty and immediacy they provide.
Many buyers are reluctantly accepting the need to do refurbishment for the right property, as a large proportion of stock is in average condition, having been lived in or rented out for long periods. But they are shying away from big renovation projects if they have the choice. The exception tends to be our ultra high net worth clients buying trophy homes for £15 million upwards, who don’t need to sell their current home to buy an onward property. They have the affordability to commit to a large project and can stay living where they are for the duration of the project, with no interim upheaval.
Good buyer etiquette matters
One point we’re reinforcing with every buyer we represent is the importance of good buyer etiquette. Sellers (and selling agents) are favouring credible buyers over higher offers, so buyers need to position themselves as genuine, reliable and responsive in order to be taken seriously enough to access off market opportunities and secure their preferred property for a favourable price.
We recently handed over the keys to a beautiful £9 million house in Chelsea which we acquired off market for an insurance company entrepreneur, by working with our network to make a director approach to the owner and secure a one-off viewing. Our clients were in a chain and required mortgage, so would not have traditionally been deemed superior buyers. However, through our search process, we ensured they were positioned as transparent, committed and responsive. As a result, we were able to secure an exclusive one-off viewing and acquire the property at a competitive price.
This is a perfect example of when cash isn’t always king – good manners and personal reputation are.
About Eccord
Established in 2006 by founder and Managing Director Jo Eccles, Eccord provides meticulous prime and super-prime property search and acquisition services to buyers in central London. Working on behalf of private individuals, families and family offices, Eccord provides access to the best properties in London, often off market, negotiating and supervising the entire transaction.
Eccord also provides property management services, overseeing £1.5 billion of residential property on behalf of individual and portfolio landlords, as well as private homeowners who want peace of mind that their property is being impeccably managed and maintained.
With 17 years’ experience in the prime and super prime London market, Jo Eccles is a leading authority on luxury residential property and is consistently recognised in the Spear’s 500 as a Top Ten London Property Advisor.
