Buyer Considerations and Insights: London Property in 2024

As the frosty days of the new year thaw, the London property market is experiencing a slow but promising resurgence, signalling fresh opportunities for buyers despite high mortgage rates, a sluggish economy, and the looming general election.

The influx of new properties and price reductions by long-standing vendors are creating renewed momentum amidst economic and political uncertainties.

In this month’s blog, I’m taking a look at a few considerations to take into account when investing in London property this year, as well as a summary of the current and future market state.

Considerations for 2024 Property Investments

Energy Efficiency

Following the government's 2023 discussions on Energy Performance Certificate (EPC) requirements, energy efficiency has emerged as a crucial consideration for prospective buyers. Despite recent rollbacks on EPC requirements, long-term implications of investing in lower-EPC-rated properties remain.

Approximately 100,000 London homes fall below the EPC E rating, a significant factor in both legal lettings and energy costs. Buyers should be cautious against investing in properties with lower EPC ratings, anticipating future regulatory tightening.

Purchasing an energy inefficient property results in high costs not only for the power itself but for efficiency upgrades to ensure rentals remain legal.?

The Challenge of 'Fixer-Uppers'

While purchasing and renovating a fixer-upper in London can be rewarding, it demands a comprehensive approach involving ample financial resources, thorough planning, and a great deal of patience. With current labour shortages and rising material costs, it’s essential for potential buyers to thoroughly assess their capability to undertake such projects.

Long-Term Thinking

In the ever-evolving landscape of London's property market, it is easy to get swayed by the ebb and flow of current trends and market dynamics, but buyers should focus on long-term objectives rather than immediate market fluctuations. Reflecting on the post-lockdown rush for housing, it’s become even more important to consider personal circumstances and future plans, such as family expansion, long-term yield and commuting needs, over short-term market trends.

London's property market has a unique blend of stability, growth potential, and lifestyle appeal. While short-term market trends are important, they should be considered within the context of these enduring attributes that make London a secure and potentially rewarding investment arena.

Market Trends and Insights

Buyers aiming for long-term investment success should balance their objectives with an acute awareness of current trends:

• Sellers are increasingly open to substantial discounts in a market still boasting the UK's highest property prices.?
• The resurgence of office work and the pursuit of value are influencing sales volumes, contributing to price stabilisation.?
• A return to pre-pandemic levels of sales activity signals a market regaining its robustness.?
• With the upcoming general election, investors must also consider its potential impact on market momentum.

Desperate Sellers and Confident Buyers

Delving into the current dynamics of the London property market, recent data from Zoopla offers a revealing glimpse into the shifting landscape of property transactions in the capital.

Zoopla's data reveals a trend of desperate sellers in London accepting as much as ￡25k discounts on asking prices, while average property prices remaining the highest in the UK, with an average property price of ￡537k recorded on Zoopla’s platform.?

“Better value for money and a steady return to office working is supporting sale volumes and pricing levels in London,” Zoopla said.?

The prime housing market in London saw a slowdown in price falls towards the end of 2023, thanks to declining inflation and dropping mortgage rates. This is leading to a realignment in buyer and seller expectations, with both parties becoming more realistic about property values. Some agents have observed an increase in buyer budgets, responding to improved market sentiment.

Data from TwentyCi indicates that agreed sales in London are approaching pre-pandemic averages, driven by more frequent price reductions.?

2024’s General Election

Rightmove also reports a strong start to 2024 in the UK housing market, with average asking prices seeing the strongest surge since 2020. The increased buyer demand and property listings in January indicate a building momentum. However, the approach of the national election may temper this growth in the coming months.

The general election, expected to bring significant political changes, may impact the housing market. Wealthy overseas buyers may choose to pause investment decisions, although the effect on domestic buyers is debatable. Economic uncertainty and corporate cost-cutting are also contributing to a cautious approach to large purchases.

Despite uncertainties surrounding the upcoming general election, prime central London's residential market is expected to remain resilient. Predictions for price growth in 2025 are moderate, considering factors such as a higher tax environment and scrutiny on sources of buyer wealth. However, early interest rate cuts in 2024 are stirring up the market, leading to more competitive mortgage deals and a potential uptick in buyer activity.

2024 presents a complex yet promising landscape for London's property market. With an understanding of market trends, both buyers and sellers can navigate this dynamic environment. The year ahead promises a delicate balance between caution and opportunity, making it an ideal time for informed and strategic property investment in London.

If you’re contemplating an investment or are interested in hearing more about the trends of the London property market, get in touch - [email protected].