Two distinct cohorts of buyers and sellers exist in the current market. The first are highly motivated buyers and sellers, eager to transact now. Sellers know that less decisive buyers are likely to remain on the sidelines until at least the end of January before beginning or resuming their search.
So, if they don’t agree a pre-budget offer, a sale will be unlikely to complete until early spring. Buyers in this group are taking a long-term view and seeking to capitalise on value.
Some are submitting low offers but agreeing much closer to asking price where the property is already competitively priced. Negotiation in this market is not straightforward. Preserving goodwill and credibility is essential, and success in persuading a seller to accept a lower offer requires an understanding of subtleties and negotiating with judgement, not just financials.
The other cohort are those sitting out the market and watching on the sidelines until certainty from the delayed and much awaited Budget on the 26th November. Other countries are also at crunch time with economic and political uncertainty, so this is adding to the waiting game.
PIED-A-TERRES DOMINATE BUYING ACTIVITY
Five years on from the covid lockdowns, we’re seeing the return to the office trend continuing to play out and this year nearly 35% of our clients have been UK-based buyers acquiring London pied-à-terres.
This has dominated our buying client activity over the summer and this autumn, with searches between £3m – £7m across Marylebone, Soho, Covent Garden, Chelsea, Belgravia and Shad Thames for clients in banking, private equity and commodity trading.
“A convenient base during the working week and a long-term London bolthole.”
A common thread with each of our British pied-à-terre buyers is that their family home is outside of London but they work in the capital during the week, and they have children either in or approaching teenage years. Each has a clear dual purpose – a convenient base during the working week and a long-term London bolthole their families can enjoy during weekends and holidays.
We have seen a preference for understated versus flashy, prioritising a central location close to transport and London attractions, shopping and restaurant scenes, and ideally turnkey condition for ease.
While these are discretionary purchases, most have been carefully considered over time. The mix of lifestyle benefits and value opportunity in the current market has prompted clients to act, viewing these acquisitions as long-term investments in both quality of life and family time.
THE REAL DIFFERENCE ACROSS THE POND
Last month I spent a week in New York and one topic that came up repeatedly is the striking differences between the US and British property markets.
In the US, buyers and sellers each appoint an agent who acts on their behalf and has access to a centralised multi listing service (MLS) that provides transparency, visibility of all available properties, and widespread collaboration. Fee-sharing is common, and only a small proportion of transactions happen truly off-market.
“There is a distinct separation between buying and selling agents.”
London is very different. There is a distinct separation between buying and selling agents, and those who attempt to operate on both sides often encounter limited collaboration, as other agents view it as ‘stepping on the other side’s turf’.
Buyers must navigate multiple online portals, an average of 30 selling agents per neighbourhood – many of them independent with limited visible presence – and personally contact each one to enquire about listings. Even then, nearly half of properties sell off-market and may never appear online.
One American couple illustrated this perfectly. Before arriving in London, they had contacted a single selling agent, Jeremy, expecting him to show the best options for their brief.
“They would need to reach out to 30 different ‘Jeremys’ per neighbourhood.”
They soon realised that to truly see the top properties, they would need to either appoint a buying agent or reach out to 30 different ‘Jeremys’ per neighbourhood – and even then, some off-market opportunities would remain unseen. The revelation left them equal parts amused and bemused at London’s fragmented system.
The transaction process is also different. In the US, a financial deposit secures a purchase while due diligence is conducted.
In England, by contrast, nothing is legally binding until exchange of contracts, which can be many weeks later. Until that point, either party can walk away for any reason, or the seller can accept a higher offer from a late bidder.
Buyers are left exposed, having incurred costs on surveys, legal fees and other due diligence with no guarantee of completing the purchase.
KEEPING REPAIR COSTS UNDER CONTROL
The Renters’ Rights Bill as received Royal Assent and while we await details of its implementation, one thing is clear: tenants will be able to serve notice at any time with just two months’ notice.
This makes property condition and maintenance more important than ever in attracting and retaining high-quality tenants.
Between Q1 and Q3 this year, the volume of work orders handled by our Property Management team rose by almost 50%, reflecting both growing tenant expectations and the challenges landlords face in securing skilled tradespeople quickly and cost-effectively.
“Expenditure control and value are a priority.”
With contractor costs stabilising around 35% higher than pre-pandemic, expenditure control and value are a priority.
A recent example involved a rental investment we manage for a corporate lawyer near St Paul’s. The tenant couldn’t switch off the bedroom AC and a contractor quoted almost £500 + VAT to investigate.
Instead, our property manager visited the property and on removing the false ceiling, discovered that the unit had been accidentally set to manual during a recent repair.
Restoring it to the correct setting solved the problem instantly. By also negotiating discounts on the original repair and a carpenter’s invoice, he saved our landlord close to our entire annual management fee.
Technical expertise, proactive management and trusted contractor relationships are more important than ever in protecting landlords’ yields – and keeping tenants happy.”
