It will take time for vendors to accept the fact that buyers are far more price sensitive these days, says Black Brick.
Transactions are likely to remain low in Prime London during the months ahead, as buyer and seller expectations remain out of alignment.
This is the prognosis from PCL buying agency Black Brick, which has reported a “very sticky” start to the summer, with buyers “far more price sensitive” than they were at the peak of the pandemic.
The firm suggests it will take time for vendors to accept this fact, and start pricing homes at the lower end of the PCL scale at a level to tempt interest. Until then, unfortunately, much of the market looks set for deadlock…
“I have found that there tends to be a long delay, in a market which is slowing, for that message to sink in for sellers that they need to be realistic about prices,” said managing partner Camilla Dell. “We are just starting to see prices coming down a bit – even where we have been previously told that a seller is in no hurry – and some sellers are becoming more amenable to negotiation.”
While there’s no sign of the double-digit price falls that were being predicted at the start of the year, the team is seeing a “very selective market” which has more in common with pre-pandemic times than with the rollercoaster journey since 2020.
“Buyers are still out there”, said the firm in the update to clients, “particularly cash buyers operating at the top end of the market, but despite healthy budgets they are not willing to pay over the odds for properties. They are also taking the time to be very choosy when it comes to location and specification. As a result, while prices are holding firm, the number of deals being made is the indicator which has taken a hit.”
“Those 2023 forecasts were always ridiculous,” added Caspar Harvard-Walls, a partner at the firm. “The problem was that they did affect buyer confidence and sentiment”.
He suggests the market is now undergoing “normalisation”, with interest rates no longer at a record low, and the race for space far less of a driving force: “We were just spoiled during the Covid-19 market…It was a false reality, a completely unusual set of circumstances. Now buyers are saying hold on, that property is the wrong price, and that is how it should be.”
The latest LonRes data showed PCL sales activity in April was 34.7% lower than in 2022, with the year-to-date total down more than 24%. The number of properties under offer was down 11% year-on-year.
The high-end sector of the market has outperformed, however – agreed sales above £5mn were up 26% on last year and are more than 50% above the average levels seen between 2017 and 2019.
Dell says the reason for the “two-tier” market is simple: “The people who are buying at the moment are wealthier clients who are less reliant on mortgage finance. They include overseas buyers who are still buying in London because of the weak pound, and they tend to have bigger budgets.”
The estate agency Strutt & Parker decided to retain its 2023 sales market forecasts last week, citing “renewed confidence” and “signs of recovery and stability” in around South East, East of England and Prime Central London as cause for a relatively bullish outlook.
At the national level, Strutts expects the average UK house price to drop by up to 5% through this year (something between a -5% and a 0% annual change), while Prime Central London could see prices either rise or fall by 3% (a -3% to +3% forecast range for the current year).
Prices in Prime London and around the UK are still on track to rise by between 10% and 15% over the next five years, according to the firm’s analysts.