Coronavirus and the property market in London.
2020 has been a fascinating year so far for the property industry in the prime areas of central London.
Most central London based Estate Agents were in good spirits earlier this year after a so-called “Boris bounce” produced a turnaround in fortunes for the property market.
During late 2019, and once the spectre of a Jeremy Corby Government had dissipated, the property market in London saw a return of buyers and sellers in positive spirits. There was new life in the property market and tangible results were in evidence.
London house prices began to stabilise after 4 long years of negative growth and a number of homes which failed to sell earlier in 2019, found buyers.
Buyers who had waited patiently through 4 years of negative headlines and falling prices came out of their shells and chose to get on with their lives. Buyers who simply couldn’t wait any longer gave the property market a genuine momentum shift leading to several attention-grabbing headline sales being achieved.
Then it all came to a crashing halt again in March 2020. With the rapid worldwide spread of COVID 19, Estate Agencies closed down visiting properties for sale or to let became unlawful.
It had become virtually impossible for the market to function at anything like its normal volumes.
Transactions involving properties which were “under offer” at this time mostly fell through.
Almost immediately, speculation in the property news began as to where this would leave the property market and house prices going forward.
Most observers predicted prices to come down by at least 5-10 per cent.
One high profile private bank went much further, predicting armageddon like prospects for house prices, claiming London was vastly overpriced!
The reality of what we have facing us is, in fact, a complete unknown as we speak. It is also impossible to generalise an outcome for all London property. COVID 19 is simply not going to affect the same outcome for all types of properties in all locations.
So where does this leave the market for high quality prime Central London property?
Firstly, a lot will depend on how many properties are listed for sale as this pandemic is brought under control.
If the property portals are flooded with new properties coming to the market we doubt there will be enough residual demand to maintain prices which were being achieved pre lockdown.
The early evidence suggests that this will not be the case.
From what we have seen from previous property market shocks, owners of the very best London properties rarely list them for sale in times of negative house market headlines. There will be those who have to sell in the next 6 months but our experience tells us that high-quality property will extremely be difficult to source for the remainder of this year.
As we are hopefully approaching the end to the first wave of COVID 19, it looks as though demand from property purchasers is still there to some degree. In the second month of the lockdown, both Savills and Knight Frank reported enquiries from potential property buyers already back up at pre-COVID levels.
With headlines focussed on property prices inevitably falling as a result of COVID 19, this may be bargain hunters looking for cheap deals. It is too early to say whether enough sellers will be willing to accommodate this type of demand.
Most sellers will simply sit tight and wait for better times.
New buyers in the market at this time are almost certainly expecting to see some compensation for what most would consider being a brave time to be getting back into the property market. At the same time, discretionary sellers are unlikely to be reducing their price expectations. A perfect storm. The probable outcome will be a London property market characterised by very low volumes of transactions, for at least the remainder of 2020.
There will be some discounts to be had from sellers who have to sell during the next 6 months or so.
Whilst we predict that most high-quality property owners will choose not to list their properties for sale until the positive headlines return, there will be those who have to sell in the remainder of 2020. These are the properties which will have to show a reasonable discount in order to reflect the present uncertainties and to attract a buyer. This is where further negative headlines for the property press will be generated.
It is during periods such as this that we often see an increase in high-quality properties being offered quietly off-market. We just cannot see a scenario where below the radar transactions of the very best properties will attract anything like the discounts which will be available in the wider market.
If this is the case and buying prime properties continues largely to be an off-market business, prices for the best houses and apartments will not fall as far as most have predicted.
Where we see potential advantages for buyers is in the investment market.
There will be fewer investor buyers in the market at the moment and developers who will still need to sell.
As the stock market rallies, property investment buyers will no doubt return in good numbers. Buyers who get in early before the rush created by the return positive house market headlines will make the biggest gains.
Enter the market during periods of uncertainly and you will definitely find motivated sellers who will be more receptive to a “low” offer.
COVID 19 has had a devastating effect on the UK.
We will feel the effects on our economy for the foreseeable future.
It will be some time before international travel returns to anything like normal volumes. Without international property buyers in London, the prime property market will remain largely on hold.
We see a sustained period where it will be far more difficult to source and purchase the best properties in prime central London as the majority of owners hold off until the good times return.
So will there be a post coronavirus property market in London?
Property Buying agencies will certainly earn their fees persuading sellers to sell and in negotiating purchase prices away from the spotlight for the very best properties.
As ever, the importance of contacts and networks and long-standing experience will be incredibly important. A good buyers agent will still be able to create opportunities for their clients. It might be more of a struggle persuading property buying clients that now is the best time to be getting back into the property market.
The property market for the highest quality houses and apartments will no doubt continue albeit at very low transaction volumes. It will function mostly under the radar and go largely unreported.
High-quality Houses and apartments which do sell will rarely be listed on the property portals or Estate Agency websites.
Prices achieved in 2020 will definitely reflect these uncertain times.
But we just cannot see the mass panic selling of prime property assets in London for the remainder this year.
Great London properties will remain scarce and it will be difficult to persuade owners of such properties to sell at a significant discount.
If you want to buy a great penthouse in London during the remainder of 2020, you will still need to pay a premium price. Quite what the premium price is will be a factor of the circumstances of the owner and the mindset of the buyer. There is no doubting that the premium payable for the very best properties will be lower as a direct result of COVID 19.
So in summary, some house prices will inevitably fall during 2020. There will be a measure of pain to endure for those sellers who have to move this year.
However, expectations will remain high from discretionary sellers of the very best properties and it is here that we expect prices to remain firmer.
No doubt that the prime property market in London will be very slow for the remainder of this year. But there will be a market and a number of properties will transact off-market and below the radar.
Now that Estate Agencies are able to open their doors and recommence property visits a sense of normality will inevitably return.
Demand for prime London property seems to be out there but it remains to be seen at what level these buyers are willing to transact.
How much of a market there is will largely depend on how many sellers list their properties in the remainder of this year.
Demand seems to be reasonably strong despite the economic chaos that COVID 19 has wreaked but it will take some time for international buyers to return to buying London properties in any great numbers. 90% of the property market in London will begin to function again as the COVID headlines recede and our exit from Europe is played out. The very top of the market will take longer to recover to anything like normal levels of transactions as international buyers feel comfortable travelling internationally again and spending their cash on discretionary purchases in London.
“Other” property market headlines speculating about a mass exodus out of congested cities and the desire for properties with larger gardens all have a measure of credibility to them. We just cannot see the lure of prime central London waning despite the present circumstances we are all facing.
If you are looking to take advantage of a quieter property market and would like to be kept informed of off-market properties which might suit your needs, please fill in our contact us page and we will schedule a call to discuss your property search in detail.