The closing months of 2023 saw a noticeable dip in the enthusiasm of ultra-high-net-worth (UHNW) individuals seeking London’s most prestigious properties. This trend was driven by a general sense of uncertainty, leading to a ‘lack of urgency’ in property transactions, especially during the typically busy Christmas period. Jo Eccles, a leading figure in the super-prime property market, attributes this slowdown to various economic and political factors.
A Shift in Mindset
Despite the 2023 lull, there’s a positive shift on the horizon. As we approach 2024, there’s a renewed interest among UHNW clients in acquiring ‘best in class’ properties. This change in attitude is partly due to the stabilization of property prices at the high end of the market. Eccles points out that significant price drops for top-tier properties are now unlikely, providing reassurance to potential buyers.
Political Stability and Its Impact
The pre-general election uncertainty has somewhat eased, especially with Labour’s front bench clarifying their economic policies. Notably, the party’s decision to scrap the mansion tax policy has been a significant factor in restoring buyer confidence. Regardless of the election outcome, major changes in property-related policies are not anticipated, further encouraging UHNW buyers.
Market Dynamics
2023 witnessed a quarter drop in transaction volumes in the super-prime market, yet the demand for exceptional properties remained high. The competition for London’s trophy homes continues, but there’s less interest in properties that don’t meet the ‘best in class’ criterion. Interestingly, the £5-10 million segment, particularly for turnkey homes and new branded residences, saw robust demand, unlike second-hand properties and those without attractive discounts.
International Buyers and the Quest for Value
International UHNWs have been active in the market but are selective, looking for compelling deals or properties that align with their lifestyle changes, such as family expansion or job relocation. The U.S. dollar’s strength has attracted American buyers, while the Middle East and APAC regions also show strong activity. However, Eccles notes that the super-rich are only willing to pay premiums for properties they consider genuine trophy assets.
The Balancing Act – Quality vs. Value
There’s an ongoing dilemma for buyers between securing ‘best in class’ properties and finding value for money. Despite the trend towards seeking discounts, high-quality properties continue to fetch strong prices. This situation forces buyers to decide whether to invest in top-tier properties or settle for less coveted ones at a discount.
Landlord Strategies and the Rental Market
Many landlords are keeping their options open with break clauses in their contracts, allowing them to react quickly to market changes in 2024. The scarcity of available properties has driven rent prices to record highs, but the recent influx of ‘accidental landlords’ might relieve some pressure on the rental market.
The Rise of Commercial Property Investments
In 2022, UHNW buyers outpaced institutional purchasers in the super-prime commercial property market, investing $455 billion globally. This trend is expected to continue in 2024, with a focus on premium office spaces in London. Notable transactions, like the sale of One New Street Square, highlight the appeal of commercial properties as stable, long-term investments.
In conclusion, as we move into 2024, the London property market, especially at its upper echelons, is poised for a dynamic shift. UHNW individuals are recalibrating their strategies, balancing the pursuit of top-tier residential properties with lucrative commercial real estate investments. The market’s pulse seems to be quickening, setting the stage for an exciting year ahead in the realm of luxury property.