February Newsletter
The importance of buying right
I would like to start the market update a bit differently this month. We will get to how the market has performed; however, the first topic will be with the importance of using a property buying advisor who understands the market. This was inspired after visiting multiple properties over the last few weeks that have had significant discounts and a few that are selling at far less than owners originally paid. Each of these properties was a reminder of why using a buying advisor is key.
Yes, these properties might have been bought at the height of the market, however one property was selling for almost £1 million pounds less (28% less than they bought around 7 years ago). Many property buyers believe that estate agents in London have their interests at mind, however their job is to get the best possible price for the seller. A buying advisor has in-depth knowledge and experience of the market, therefore levels the playing field and ensures the best possible outcome for their client. Not only does that mean buying a property that is priced correctly, but buying a best-in-class property that should be easier to sell in the future.
Yes, there is an extra commission when using a buying advisor, however this should be viewed as an investment rather than a cost. In many cases the discount achieved by a buying advisor more than covers the fee, but more importantly you can rest assured that you are buying right – the right property, the right location, and the right price. It’s important to note that no one has a crystal ball and like any investment there is a risk. Prices can go up and down, however getting the right advise and buying a best-in-class property should mean that your investment will perform better in a weaker market.
The sales market
We are continuing with an optimistic start to the year after January, where prices in the UK increased by 1.3%. This was the highest monthly increase in prices since June 2022. This is largely thanks to the drop in mortgage rates, which are now down to 4.86% for a five year fixed rate, down from a high of 6.11% in July.
This has given more confidence to sellers – according to Rightmove, asking prices increased by £4,571 in the UK. This is the largest increase from December to January since 2020. There are also 15% more properties for sale on the portal, with the number of sales completed being 20% higher. As mentioned in the previous update, Knight Frank are predicting an increase in prices in London by 1% in 2024 and 18% by 2028%.
While the outlook is positive, the current climate could present a good buying opportunity. According to Primeresi, there have been 21% fewer sales have been agreed in prime central London so far this year when comparing to same 5-week period in 2023. Starting your search ahead of spring (which is traditionally the busiest time of the year in real estate) could mean you will face less competition. This year in particular is expected to be busy due to the decrease in mortgage rates and the potential rush to buy ahead of the election later in the year.
The rental market
After a 3.5% increase in prices in the prime central London market last year and a 29% increase since pre-pandemic levels, it seems that prices are starting to stabilize. Landlords who were getting carried away with prices have started to lower their expectations, according to Chestertons. There are 41% more properties to rent in comparison to January 2023, giving tenants more choices and therefore more time to make decisions.
While this might stabilize the market, I don’t believe it will decrease prices. In January, Chestertons had a 7% increase in viewings compared to the same month in 2023. According to a recent article in The Wall Street Journal, many owners of prime central London properties are choosing to rent their property rather than sell due to a slower sales market, which should continue the demand for rental properties.