January Newsletter

The London property market started the year with welcomed news – a high likelihood that the Bank of England will make its first cut to interest rates in the first half of 2024. This has had a positive effect on market predictions for the year, which I will explain further in the update. Although the year started with good news, the market is still price sensitive, especially with the uncertainty of an election later in the year. 

A positive change of predictions

The likelihood of the cut in interest rates is especially welcomed after 15 consecutive base rate hikes and two holds. According to Tom Bill, head of research at Knight Frank, “we now expect UK mainstream prices to rise by 3% in 2024, which compares to a decline of 4% predicted in October. With low-level single-digit growth in subsequent years, we expect cumulative growth of 20.5% in the five years to 2028.” 

Buyer demand & price sensitivity

Buyers have shown more of an appetite, with enquiries up 14% in the first week of 2024. The lower interest rates will ignite the buyers that put their searches off while the rates were increasing. These buyers are also fed up with the increase in rents – 17% at its peak last year and a predicted 5.5% this year. Even though there seems to be more activity from buyers, they are still after a deal and are very price sensitive. 

While the market has proven to be robust (only dropping 0.9% in PCL last year, far better than predicted) we are very much in a buyer’s market. Sellers are starting to realise that they will not be able to set record prices for their properties. According to a recent article in the FT stating figures from the estate agency Hamptons, “a record 50 per cent of homes sold in England and Wales in 2023 went for a reduced price, up from 32 per cent in 2022. In 2021, 31 per cent of homes sold following a price reduction, a 10-year low.” It’s imperative for sellers to bring their home to the market at the right price, otherwise they run the risk of price reductions and the property being on the market for a significant amount of time. 

The 2024 elections could have an impact on the prime central London market. Should the labour party win, they are planning on increasing stamp duty of foreign buyers of secondary homes. Should the Conservative Party remain in power, there have been talks of a reduction in taxes and stamp duty. The election is in autumn, so the consensus is that spring will be busy and that there could be a potential slowdown closer to the election period.

2024 buyers

Where does that leave those who are planning on purchasing this year? With a predicted busy period over spring, I would recommend starting your search as soon as possible to take advantage of lower levels of competition. While no one has a crystal ball, should the labour market be voted in there could be the additional stamp duty tax for foreign buyers buying secondary homes as previously mentioned. Levels of quality stock are still currently low; however, this should start to improve. Working with a buying agent is key to acquire a best-in-class home, whether that is on the open market or off the market.