While the final quarter of 2023 has witnessed a subdued attitude among buyers searching for London’s super-prime trophy assets, a ‘mindset change’ among UHNWs over the past few weeks will see clients ramp up their searches for ‘best in class’ properties as the new year approaches.
According to leading super-prime agent Jo Eccles, founder and managing director of Eccord London, a general feeling of uncertainty has contributed to a ‘lack of urgency’ among buyers during 2023, following through to a quieter than average Christmas period for transactions of London’s top properties.
However, there are now signs of stability at the top end of the market, which should lead to healthy activity in Q1 and Q2 of 2024, she suggests.
‘[Buyers] are reassured by the fact that prices for best in class property have remained stable,’ Eccles tells Spear’s. ‘Significant price falls in this segment of the market are now unlikely.’
She continues: ‘We have seen a mindset change in the past weeks, as clients look ahead to next year. Buyers who have been sitting on the side lines are increasingly embracing a “life goes on” attitude.’
While UHNWs have been grappling with some pre-general election uncertainty, this has largely dissipated given reassurances made by Labour’s front bench over how economic policy may change if they win.
‘This time round, the main political parties are more centrally aligned – particularly after Rachel Reeves’ assurances that Labour’s mansion tax policy has been scrapped,’ Eccles explains. ‘Whatever the outcome, buyers aren’t expecting any major property-related policy changes in either direction.’
UHNWs want ‘best in class’ super-prime homes – or to feel like they’re getting a good deal
For the super-prime market as a whole, transaction volumes dipped in 2023 by around a quarter, yet prices remain high as buyers continue to engage in healthy competition for London’s genuine trophy homes. By contrast, there has been lower demand for properties that are not deemed to be ‘best in class’ assets.
Despite strong demand for flats in the £5-10 million segment of the market, where turnkey homes and new branded residences projects have proved popular this year, there has been ‘reduced activity’ for second-hand properties and purchase opportunities without enticing discounts.
International UHNWs have been present in the property market, yet they are only willing to consider making transactions if there’s a ‘compelling’ deal on the table – or if they need to make a life change, Eccles says. As a result, market activity has been driven ‘almost entirely by trophy home purchases or needs-based buyers moving due to new jobs, expanding families and school places.’
According to Savills’ Jonathan Hewlett, there has been rising demand for London property from US-based wealthy buyers given the strength in the dollar, as well as strong activity from the Middle East and APAC regions. Yet Eccles tells Spear’s that the super-rich crowd will only pay premiums for what they perceive to be ‘genuine trophy assets’ – and expect good deals on everything else.
‘Buyers are grappling with the dilemma of best in class versus perceived value for money. Best in class properties across the board have continued to achieve strong prices which is at odds with discount-seeking buyers, who must decide whether they want to underpin their investment with best in class or achieve a discount on a slightly less coveted property.’
Eccles also noted that many landlords are ‘keeping their options open’ with six or 12-month break clauses in contracts with tenants – allowing them to ‘move quickly’ if sales conditions improve next year. Sellers will no doubt be following prices closely in the ‘discretionary’ apartments market to work out the best time to sell up.
While a lack of supply has driven rent prices to record levels, this is also set to change as ‘accidental landlords’ have transitioned into the rental market in recent months – easing some of the pressures felt by tenants.
Commercial property boom to continue in 2024 as UHNWs pivot away from residential-only searches
One particular focus for UHNW buyers over the past year has been commercial property, which has emerged as a valuable asset class as global family offices have shown interest in premium office spaces in London.
In 2022, UHNW buyers outpaced institutional purchasers of super-prime commercial property for the first time, according to Knight Frank’s 2023 Wealth Report. They bought the equivalent of $455 billion in commercial real estate, which represented 41 per cent of the global market. By comparison, private equity funds and other institutions spent around $440 billion.
Knight Frank previously predicted that 2023 would see UHNW buyers and family offices spend £2.4 billion on London commercial property. Earlier this year, the property agency advised on the sale of the £350 million One New Street Square to the privately-owned, Hong Kong-based Chinachem Group. That building now serves as the UK head offices of Deloitte, which has a 14-year lease on the building, and generates an annual rental income of £16 million.
‘There are very good deals in the [commercial] market if you are fast, and if you are a cash buyer,’ Byron Baciocchi, chief executive of Unica Capital, an active property investment firm in the prime London commercial and residential markets, has told Spear’s. ‘And I think 2023 and 2024 is really the period to buy’.