It is good to be back!
The government’s announcement in mid-May that property viewings could recommence in England has enabled the comatose London property market to slowly come back to life….
As expected, there is speculation about how the property market will fare and what implications this lockdown will have on the wider economy, short, medium and long term. The reality is that no matter what people say, we are all in unchartered waters.
After 3 weeks of activity, this is what as London Property Finders we are currently seeing first hand:
1: #thenewnormal… there are new protocols to follow when buying a property and even to view a property. To begin with, viewing a property is not as straightforward as it once was, with many buyers reporting they have been requested by agencies to provide ‘proof of funds’ before being taken to an actual viewing.
2: #pentupdemand: we have noticed real determination from buyers and sellers alike wishing to continue with their property moves this year as originally planned. Zoopla has reported an “unprecedented” resurgence in agreed sales and a strong bounce in “active engagement” with property listings from potential buyers. The number of newly-agreed sales listed on the platform has rocketed by 137% since the property market re-opened on 13th May, with the tally in the first week of June coming in just 12% short of pre-lockdown levels.
3:#propertyprices & #discounts: Over the past few years, the London property market has become very fragmented. If anything, the lockdown exacerbated that trend. However, certain things remain: If a property is priced correctly, there is interest, and the phone rings. And chances are, that property will sell close to the asking price. From our experience and after talking to many agencies over the past few weeks, we are seeing that price discussions are on a case by case basis: there has been gazumping, price chipping, and ‘normal sales’. Where discounts were agreed, they were on average around 5% less than the asking price (or the price in March, pre-lockdown). Everybody we have spoken to has said buyers pushing for 20% discounts (#covidprice) are just been told ‘no way Jose’. It finally looks as if agencies are advising vendors on ‘realistic’ selling prices in order to capture that initial flurry of activity and generate interest. Nobody wants to be chasing down the market.
4: #bestinclass: As we said above, the market is fragmented. ‘Best-in-class’ commands and is currently achieving a premium. However, the list of best-in-class is not just limited to a top address in Mayfair, Belgravia, Marylebone or Notting Hill but it now includes the #newpriorities (outside space, office or study, maybe a gym, etc). Note: We will write a separate article on this.
5: #stock…. Unfortunately, stock levels remain low. There is much pressure on the government to lower the stamp duty or to offer some sort of tax-holiday but we doubt they will do it. Scarcity of stock means current prices are likely to hold their ground. However, we believe there is a silver lining towards the end of the year as supply levels could be significantly boosted by a spike in divorces during the Coronavirus lockdown as well as (unfortunately) probate sales and a baby boom (people looking to trade up).
6: #rentals. Lockdown affected the London rental market the most. First, properties that were empty had to decrease their rates to attract interest. Here 20% discounts of asking prices are possible. Second, a flurry of properties that were used for short term purposes (Airbnb and the like) went back to the long term market as demand for short term properties died. The increase in stock levels has benefited renters. The Central London market is a magnet for foreign students who might not return this year, so it remains to be seen if prices will return to normal this summer (peak season).
What we expect:
The £1m to £2m market is likely to continue ticking along as mortgage rates remain low and the pound is weak. £2-4m market, the traditional ‘family segment’ may suffer if many people lose their jobs. The £4m+ market is likely to be the most affected price bracket as long as the clouds of quarantine and covid remain, as many of those who buy at these levels are foreigners who cannot or will not travel.
For now, and the foreseeable future, we will have virtual tours, gloves and masks on viewings as “#thenewnormal” that we all need to get used to. As ever, having the right information and the right partner is key to making an informed decision when buying real estate in Central London.
If anything the level of off-market properties will increase... and you know, you can get access to those online, you need to have an experienced property finder to give you access but more importantly help you navigate the London property market.