Market Update November 2024

Rich Pickings

The wealthy were predictably in the hotseat in the Labour’s government’s first budget in a?generation.

Air passenger duty on private jets was upped by 50%. The imposition of VAT on private school fees was confirmed.

More significantly, for London’s property market, the Stamp Duty surcharge for second homes (irrespective of whether the buyer is British or international) was increased by 2%, with immediate effect. This means that, depending on property value and buyer nationality, buyers of second homes will pay up to 19% over the value of their home in buying tax.

Labour has also fulfilled a key manifesto pledge. The “non-dom” tax regime will end in April?2025, although chancellor Rachel Reeves did promise to replace it with a new scheme with “competitive arrangements” for wealthy international residents. Black Brick will be awaiting further information on this with keen interest.

Tom Kain, a partner at Black Brick, believes the prime market will be able to absorb the tax?changes. “I think that in the very short term, between now and Christmas, things could be a?bit slow,” he said. “It will take a bit of time to feed into peoples’ psyches and there may be?buyers who attempt to negotiate a 2% price cut to cover the higher tax. But it does not fundamentally alter why people like to buy property in Prime Central London (PCL).”

Camilla Dell, managing partner at Black Brick agrees. “As with previous rises in Stamp Duty, we expect the ultimate price for the rise to be paid for by the seller.

“History has shown that when Stamp Duty goes up transactions slow down while reality sinks in. Prices then fall in line with the rise, and sometimes overshoot it. “

As a result, Dell expects to see more standoffs between buyers and sellers over who will cover the extra tax. “At Black Brick we are already embarking on some tough renegotiations for clients under offer and not yet exchanged to take into account the additional 2%.”

The Rental Landscape

Reeves decided against hiking Capital Gains Tax for buy to let investors – a widely?anticipated move which sparked an exodus of landlords from the sector over the summer.

Despite this concession Kain fears higher Stamp Duty bills will deter investor buyers from adding to their portfolios in future. “It is just another layer of cost in what has become a massively unattractive investment,” he said.

However, there could be a silver lining for investors buying multiple properties.

“Interestingly there’s been no change at all to “the rule of six”,” said Dell. “Investors buying six or more properties, or a property that is classed as mixed use – with residential and commercial uses – still benefit from significantly lower Stamp Duty rates of just 5%.

“I expect to see more interest from bulk investors taking advantage of the current buyers’ market.”

Bulk investors enjoy a series of benefits beyond Stamp Duty: control over their running costs, the opportunity to sell a building if the need arises, or to break it up and sell flats individually,?and the ability to negotiate a better price.

“At Black Brick we’ve successfully negotiated as much as 20% from asking prices on bulk deals from developers,” said Dell. “And with rents rising and yields improving, this sector is looking more attractive, particularly for freehold blocks.”

For those looking to rent in London the landscape is tough right now. A shortage of stock means rents have increased by double digit increments every year since the?end of the pandemic and renters face fierce competition. Happily, Black Brick offers a?dedicated Rental Search Service to help tenants navigate this tricky market.

Fireworks On The Horizon

Anxiety about the budget has had a dramatic impact on property sales in the British capital.

The number of ￡5m plus homes sold in the UK – the vast majority of which are in central?London – fell 18% in the year to September, according to research by Knight Frank.

Now that the autumn statement is out of the way two more milestone events promise to shape?how the autumn property market plays out.

On November 5 America goes to the polls. The race for the White House has rarely been?tighter with Democrat Kamala Harris and Republican Donald Trump slugging it out to win?over undecided voters. Just the prospect of a Trump victory has been encouraging US buyers?to invest in safety net property in London.

A second Trump presidency can only increase the flow of Americans house hunting in London, although a volatile president could interfere with everything from transatlantic diplomatic relations, to trade agreements, and the war in Ukraine.

Two days later the Bank of England (BoE) meets to discuss interest rates, following a cut to?the rate over the summer. Kain believes that rates could fall over the next 12 to 18 months,?dropping to between 3.5% and 4%, however, falls in rates could be scuppered by higher?spending and inflation as a result of the budget.

July’s rate cut had a positive impact on the market. While completion numbers have fallen in the past year the number of sales agreed has been increasing, which should be reflected in improving data by the end of the year. According to central London house price analyst LonRes reports the number of properties going under offer in September – in all price brackets – increased by 22.1% annually. “There was a bit of feelgood factor, and a mini surge of confidence when rates dropped, and with a new Government in office,” said Kain. “Another cut could have a similarly positive effect.” Whether the BoE’s monetary committee will be brave enough to cut is another matter. The Consumer Price Index, a key measure of inflation, stands at 2.5%, and is not forecast to hit two per cent, the target level set by the bank, until 2029.

Pastures New

After years of uncertainty Reeves confirmed that the new high speed rail service between?London and Birmingham will terminate at Euston. This commitment will trigger the?redevelopment of this unlovely transport interchange with new shops, cafes, and restaurants.

“Transport and infrastructure upgrades have always been successful in upscaling an area,”?said Kain. “Just look at the redevelopment of King’s Cross which has pushed property prices?up to a whole new level.”

While the plans for Euston are more modest than those which have transformed King’s Cross?they will shine a new spotlight on homes east of Regent’s Park and in Bloomsbury. Whilst?certainly not fashionable right now both have some beautiful period townhouses and apartments, and are currently significantly better value than neighbouring west Regent’s Park?and Marylebone.

For buyers looking for a central London home with price growth potential, homes here?should coat tail on the back of Euston Station’s increase in stature.

Glittering Prizes

While sales in PCL have been slow this year, stand out properties will always find a buyer.

In Mayfair the former home of Countess Raine Spencer, stepmother of Princess Diana, sold?within three days of hitting the market in October. The five bedroom house on Farm Street,?with its dining room painted exactly the same shade of red as those at Althorp House, the?princess’s childhood home, had an asking price of ￡11m.

In Little Venice, meanwhile, another big ticket deal was achieved with the sale of Canal?House on Blomfield Road. The 10,000 sq ft property had an asking price of ￡30m.

According to Savills the key PCL for big ticket sales this year are the traditionally gold plated?neighbourhoods – Kensington, Belgravia and Mayfair.

Like the Spencer house most of the prime homes sold this year were period properties (91%), partly because the pipeline of new build homes has started to run dry thanks to?increased planning restrictions and high construction costs post-pandemic.

Essential Listening – SPF’s Sarah Kelly and Rob May

This month’s episode of Finding Perfect Property – Diary of a Buying Agent was extremely timely. We chatted to Sarah Kelly and Rob May from the private office at SPF about financing prime property and life insurance solutions for HNW clients. Life insurance is not something that clients often think when it comes to protecting assets from UK inheritance tax, so this episode is well worth a listen for anyone looking at protecting their assets for future generations.

Listen to the episode here

Watch the episode here

Acquisition Of The Month 1: Lord’s View One, St John’s Wood? – Price:?Confidential

An advantage of buying a new build flat is the possibility of negotiations to its layout and?décor during the building process.

Black Brick were able to help clients looking for a London holiday home do just this. We?found them a brand new penthouse apartment being built on the roof of an established?building – an increasingly common practice in smart areas of the city.

The 2,358 sq ft duplex apartment ticked all their boxes. The building is secure, its apartments?are served by a lift, and it has immaculate communal spaces. The crowning glory of the three?bedroom flat is a roof garden with views of Lord’s Cricket Ground and the City.

We were able to view the property before its official launch. Our clients loved it but wanted?some significant changes – lift access to both floors and bathrooms fitted with designer toilets?by Japanese firm Toto – which we were able to agree with the developer during our?negotiations.

Acquisition Of The Month 2: The Grove, Ealing, W5 – ￡3,100,000

Black Brick was hired to help find a perfect family home for a time poor couple in need of?expert advice and help with the legwork that goes with finding the right property.

They wanted a detached home with off street parking, and with good transport links to their?offices in the City.

These kinds of homes can be hard to find – owners often stay in them for decades. But we?were able to find them a five bedroom, Victorian house with a large garden and private?driveway. The new Elizabeth Line service means trains to the City take around 20 minutes.

Not only did we negotiate a substantial discount off the asking price, but we recommended an?interior designer to help our buyers redesign their new home.