Market Bifurcation

Market bifurcation is not a new phenomenon. In fact, it is something we have been discussing for many years. London’s prime market has never been a single homogeneous unit that rises and falls uniformly. The market is very quality specific and the gulf between the best and the rest is now starker than ever.

Whilst indices and market averages would tell you that values in the prime markets have been broadly flat since the pandemic, and even fallen c. 20% since 2014, they fail to articulate the divergence of quality between the very best the market has to offer and the disappointing rump. For example, we have seen considerable growth for the finest houses in Holland Park and Notting Hill (from c. £3,000 per square foot (psf) to over £5,000psf in recent times), whilst the remaining apartments within the Super Prime new build schemes habitually achieve between £6,000psf and £8,000psf+, with records being broken regularly for the very best. Meanwhile, where there is any meaningful compromise to quality, buyers are much more discerning, demonstrating little appetite for overpaying or bearing the cost of material issues that arise out of due diligence.  

In terms of volumes, the live data that we harvest suggests that transaction numbers are receding, with sales in Q1 2024 of properties at £5m+ down 35% since 2022, and down 20% year on year, according to Savills research. Interestingly, buyers remain focused on houses, at least in the £20m+ segment of the market. As volumes contract, activity focuses even more acutely on the very best properties which sustains values and pricing norms and ensures the more unique and special homes continue to trade competitively.   

As the months roll on, we are slowly seeing more properties come to the fore (almost all via off market channels) which could produce an uptick in trading numbers. Unfortunately, much of this stock is being delivered by downsizers, many of whom have been waiting for the right moment to sell since before the pandemic. Whilst they may have hoped for a spring window before the election got underway, that moment has passed, and we imagine many of these properties will now remain in the shadows until the autumn. Since most buyers still favour turnkey or newly developed properties over taking on a project, we continue to witness a ‘stand-off’ on price as sellers fail to acknowledge the real cost of refurbishment to be borne by buyers. The net effect is that for these properties it is taking longer on average to agree commercial terms whilst transactions themselves are increasingly arduous, with parties becoming entrenched in negotiating price adjustments and retention mechanics.

As they say, timing is everything and Westminster’s prohibition on new build apartments over 200 square metres means the pipeline has fallen dramatically (by c. 80% since 2016) which is helping the best developers to hold their nerve on pricing. However, our guess is that those larger scale developments in more secondary locations, and with a significant number of units to sell, may come under increasing pressure as the year unfolds.  

One new building to watch is John Caudwell’s One Mayfair which is due to complete in 2026 and may well be one of the last Mayfair Super Prime schemes of this development cycle. Designed by the great Robert Stern and with a heady mix of international interior designers at the helm, the entry level to this new and highly exclusive club is set at £30m++ with the penthouses demanding robust nine figure sums well in excess of £10,000psf. To put that figure into historical context, it is almost double the values achieved in One Hyde Park in the heady days after the global financial crisis.

What Becomes Of Agency?

In the last few years, we have seen the widespread fragmentation of traditional sales agencies. In some cases, individual sales agents have left larger corporates to set up on their own, some seeking to mirror US-style brokerages. In others, we have seen new corporate arrivals like the dramatic injection of capital into Sothebys International Realty in London. The overall effect is that the sales agency landscape is now thoroughly overwhelming and impenetrable to most incumbent buyers. Not only do they rightly question who is representing their interests as buyers in these blurred exchanges, but the plethora of sales agents means getting access to the best off-market properties comes down to relationships, credibility, and industry reputation. Having a good buy-side advisor really does matter. 

Meanwhile, the burgeoning use of social media platforms, and now Reality TV, to expose and glamorise the industry is perhaps unhelpful in misrepresenting the quality, complexity and seriousness of the work truly going on behind the scenes. It has also been described as “tone deaf” in a diverse city which, like so many other major cities, is seeking to address numerous social and economic challenges.

In this ever-changing world, where pressures to adapt are great, we have remained resolute: we only act for buyers; we only acquire homes in London; and we always put our clients’ privacy first. Privacy is fundamental to us and to the trust and respect we are afforded by our clients. We never laud our transactions on social media (or any media) and we never disclose details of our clients or the properties they acquire. To us, this is just part of being a professional advisor in the private client world. 

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Sophie and I have now been writing our Buyside updates for over 12 years. We made a promise from the outset to always be honest, to steadfastly represent the buyer’s perspective and to never sell the market. The challenging part has often been agreeing what to write as, truth be told, the Super Prime market dynamics haven’t changed dramatically in recent times, despite us having witnessed many unthinkable events globally and many-an-upset on home shores. Amidst the chaos, the very top end of the London market has robustly maintained its gentle ebb and flow – no dramatic price adjustments, no panic discounts or flooding of stock, and the very best properties continuing to demand a premium whilst trading discreetly amidst a competitive landscape. 

So, to guard against repetition, protect you from our natural tendency towards verbosity, and with an intent to keep you updated more frequently, we thought we would create ‘The Buyside – Bitesize’ – a new way to give you a pithier perspective on the Super Prime London market. We will share our honest insights from where we stand on the ground, breakdown more nuanced market data, and attempt to say what needs to be said and nothing more. Wish us luck!

The Bites

With the starting gun sounding on the election, and a Netflix reality TV show crashing into our market, we have needed multiple Bites to kick off this first edition!

Election Tension

Although we all knew there would be an election in the UK in the second half of 2024, virtually no-one had predicted a snap election on 4th July. Elections will always create a ‘wait and see’ tension in our market. Property and inequality rightly play a prominent role in campaigns and this time the abolition of the non-domicile (non-dom) regime, and what will replace it, has heightened uncertainty. However, this is not a replay of the 2019 election: we have two political parties battling for the centre ground without a populist in sight. Even Nigel Farage decided to sit this one out. From a global standpoint, it looks very benign. 

Of course, on the ground, the non-dom changes are dominating advisor discussions with clients. Leading lawyers and tax advisors expect the new FIG regime (once introduced) to broadly reflect the political announcements so far. However, there is a huge amount of detail yet to come, especially around inheritance tax, and we will only really know this once the consultation/legislation is published. Our sense is that inheritance tax is the most emotive issue; if the new government gets that wrong then significant wealth could leave these shores (or at least become non-resident) and the treasury will be much the poorer for it. From discussions we had with one senior Labour insider, we sense they are aware of these sensitivities and understand that they have to support growth if they want to deliver on their public service promises. All eyes firmly on the detail in the months ahead.

In market terms, the election and its likely outcome are to some extent already priced in, with timing the only unknown element until this week. Inevitably, segments of the market will slow in the build up to 4th July and we may even see an early summer recess as sellers decide to hold back until the autumn cycle, which traditionally starts in mid to late September. For our active clients, the election announcement hasn’t impacted their appetite to buy– their motives for buying a home in London are wholly unrelated to domestic politics or tax.

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As they say, timing is everything and Westminster’s prohibition on new build apartments over 200 square metres means the pipeline has fallen dramatically (by c. 80% since 2016) which is helping the best developers to hold their nerve on pricing. However, our guess is that those larger scale developments in more secondary locations, and with a significant number of units to sell, may come under increasing pressure as the year unfolds.  

One new building to watch is John Caudwell’s One Mayfair which is due to complete in 2026 and may well be one of the last Mayfair Super Prime schemes of this development cycle. Designed by the great Robert Stern and with a heady mix of international interior designers at the helm, the entry level to this new and highly exclusive club is set at £30m++ with the penthouses demanding robust nine figure sums well in excess of £10,000psf. To put that figure into historical context, it is almost double the values achieved in One Hyde Park in the heady days after the global financial crisis.