The Top-End Is Staying On Top
“The tills have kept ringing”! According to recent research, the luxury home market is staying strong despite widespread fears of industry affordability.
Last November, the Bank of England’s Monetary Policy Committee (MPC) raised the interest rate to 3% to combat inflation, which is running at a near 40-year high. This has since risen with each meeting, casting fears around the affordability of mortgages and other borrowing for the property industry.
Top end housing market staying strong
Despite economic uncertainly, the latest report from LonRes, which analysed the prime London housing Market for January 2023, states “the top end of the market remains strong with sales and new instructions well above last year’s levels, 56% and 43% respectively.” (LonRes Jan2023).
The report goes on to show that, while the broader London housing market is back to pre-pandemic activity, the high-end market is seeing growth in sales and new instructions. The graph below illustrates this clearly, showing market activity for January 2023 for properties worth £5m+:
Property Investment Outside London
Outside of London’s cash buyers, investors might see a little more pressure. In their comment to Property Week, LonRes managing director Anthony Payne said: “The market for 18th-century cottages in the country has seen tremendous growth, but that is a UK market and it is affected by interest rates. The second-home market could also be affected by the cost of living – if all your bills are doubling, you might wait to see what happens before buying a second property.”
Charlie Walsh, head of sales at The OWO Residences describes the current landscape as “one of cautious optimism for the luxury residential market”. Other’s echo this and state that outside of London it is about finding those “sweet spots” for residential deals both geographically and in value. According to Landmark Property Group Managing director, Konrad Keller “There is still a lot of demand for properties in the £500,000 to £2m range. This band captures both upsizers and downsizers, both of which have liquidity and a desire to move.”
Property Investors Consider Their Game Plan
Investors are also taking stock of a construction market that has lived through an 18-month inflationary period, where build costs have been difficult to predict and thus calculating total project costs required to ensure profitability. This may mean forward-buying of materials and reconsidering development completion targets.
Onyx CEO, Dan Richards said: “It is clear investors need to consider making changes to their business processes to ensure they move with the tide of change this year, however these recent results are promising for many of our developers in the high-end market. I don’t think it’s a case of ‘wait and see’ but more a ‘make your move’ action that needs to be taken as investors are hungrier than ever to find those ‘sweet spots’ the report touched on.”
Speaking of current property market conditions in a previous article, Onyx Commercial Finance Manager Ben Myers said: “It’s been a turbulent six months brought about by unprecedented base rate rises. Mainstream lenders have been hesitant with their product leveraging and pricing, which in turn has had an adverse effect on stock levels and capital values in the market.
“Are we in a recession? The evidence is unclear. We know however that recessions are cyclical in nature and if inflation is kept under control, capital values inevitably rise long term. I’m a firm believer that good quality property in desirable areas will always demand a premium no matter the wider economic circumstances.”
Onyx Property Finance are experts in providing financial solutions for property investors. We are dedicated to keeping on top of market trends and ensuring our customers are kept informed of any changes that might affect their borrowing, projects and investments – see our blog for all the latest insights.
Speak to an expert today and get up to 100% of your purchase and build costs with fixed interest rates for the lifetime of your loan: info@onyxmoney.co.uk.
References
LonRes., “Monthly Briefing – Prime London Market: February 2023 Issue”, https://www.lonres.com/public/resources/latest-publications/prime-london-market-briefing-february-2023, 17 February 2023
Pitcher, G., “Top end of housing market stays strong”, https://www.propertyweek.com/markets/top-end-of-housing-market-stays-strong/5124034.article?, 22 February 2023