"With the volume of transactions/opportunities to buy those exceptional properties remaining at historically low levels, if you want a turnkey home in the very best locations, you have to pay up for it"
- Cliff Gardiner - BHHS
The property market in 2023 has had an interesting year. Consumer confidence has been incredibly delicate, and it has been hard for owners of prime central London properties to reconcile the difference between their expectations on price and where buyers consider the market to be. The gap between buyers' and sellers' mindsets has been the biggest barrier to sales being agreed upon throughout the year.
Transaction volumes are down approximately 25% year on year. Where we have seen transactions, it has been driven by international buyers looking for trophy acquisitions or the traditional drivers of the property market such as debt, divorce and death. You will always find a certain amount of activity from those buyers who move because of a new job, an expanding family, or a change of school.
Many buyers have found surprising resilience from sellers who refuse to accept offers considered to be lowball. Not all sellers are under pressure from increased mortgage rates and are prepared to wait it out. It is still very much the case that best-in-class properties have continued to achieve strong prices.
With the volume of transactions/opportunities to buy those exceptional properties remaining at historically low levels, if you want a turnkey home in the very best locations, you have to pay up for it.
Properties which need updating or any form of renovation are sticking around for a considerable time unless they are priced to reflect the aggravation and increased costs of a refurbishment project. If you can find a builder willing to schedule a renovation project for you, don't be surprised if their quotation is double what you would expect it to be for the foreseeable future.
There is a good degree of industry optimism around for 2024. For the most part, this is based on the notion that the property market simply cannot continue to stagnate for yet another year.
The reality is that in prime central London, we have seen one of the longest periods of negative house price growth in living memory. The market has been weak and low on transaction volumes really since 2014.
If I had a pound for every time an estate agent trotted out the old maxim that the property market has doubled in value every ten years since the late 1940s, I would have retired by now. The reality around this prolonged slump we have seen is influenced by a variety of factors not least of which the state of global economies, the financial crisis around inflation and the cost of living, the supply chain issues resulting from our exit from Europe, the energy crisis, The war in Ukraine, the conflict in the Middle East etc.
Perhaps we are overdue for some growth in house prices in 2024. We have seen some growth in average incomes to support this. The Bank of England base rate may be at the start of a downward trend as the headline rate of inflation falls. Perhaps the threat of a labour government is no longer quite the prospect it may have been with a Corbyn regime in place.
For me, it is still a question of supply and demand. I am not forecasting a big turnaround in the volume of transactions in the property market in 2024.
Some will need to sell as they always do but most owners of the very best properties sit tight until the good times return. If Ukraine and Gaza get resolved and Labour settle into UK politics without too much disruption, the second half of 2024 may see an acceleration in the (slight) upturn in the property market seen recently. The last quarter of 2023 has been surprisingly active.
Perhaps buyers are beginning to visualise the bottom of the market and have been securing the last of the rock bottom deals to be had in the remainder of this year. December has always been a smart time to make a property purchase if you can find a property ticking most of your boxes. Time will tell and sentiment is a powerful thing.
Quite a number of the properties which have been sticking around this year have found buyers now that prices have been adjusted. If the Rightmove surfers see properties disappearing and not being immediately replaced there will be higher demand for what is available to purchase, and prices may rise.
On the flip side of cautious optimism is the ongoing threat of financial and geopolitical headwinds. Your worldview and sentiment around the UK economy will no doubt dictate your appetite for purchasing prime UK property in 2024 and predicting what will play out over the next 12 months is for those far cleverer than me.
