London’s Luxury Home Market Has Been Dragging for Years. These Sellers Are Diving in Anyway.
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London’s Luxury Home Market Has Been Dragging for Years. These Sellers Are Diving in Anyway.

Despite a drop in deal volume, prices remain steady in Prime Central London—and some are taking the leap

Fri, Nov 24, 2023 11:11amGrey Clock 4 min

Lesley and Johan Denekamp are keenly aware that now isn’t a great time to be selling real estate in central London. Nonetheless, in September, they went ahead and listed their 3,800-square-foot townhouse with Knight Frank, for $5 million.

Why now? The couple are sick of waiting, having already sat out Brexit and the pandemic. “We don’t think we are going to live forever, and four million pounds is a lot of money to have tied up in a house we don’t really need,” said Johan Denekamp.

The couple bought their house in St Katharine Docks, a former dockyard now an upscale marina lined with apartment buildings and houses, in 1997 for an amount they declined to disclose.

Both had jobs in London. Johan Denekamp, 64, was in advertising. Lesley Denekamp, 62, worked for insurers Lloyd’s of London. She could walk to work since the docks are less than a mile from the City, London’s historic financial district.

About 10 years ago the couple, both now retired, built themselves a country home in the county of Wiltshire. Unfortunately, driving through London’s traffic to make the 100-mile trip made their journey unnecessarily long. They decided to relocate to west London and in 2018 moved into a new-build apartment in the Brentford neighbourhood.

The couple then listed their townhouse for $6.56 million. But during 2018, the property market was hit by Brexit-related jitters and they failed to find a buyer. They decided to wait, rented the house out and sat out Brexit. Then came the pandemic and they had to sit out that, too. They have now had enough of waiting and are trying again, despite a new challenge to the market: rising interest rates.

Between November 2021 and August 2023, the Bank of England hiked rates from 0.1% to 5.25%, although it did agree to hold rates steady at its most recent meetings in September and November. Data shows that the upper end of London’s housing market appears to be bearing up well against rising mortgage costs.

According to Savills, average sale prices during the third quarter of 2023 in Prime Central London (PCL—defined as the neighbourhoods encircling Hyde Park) dropped just 1.2% compared with the third quarter of 2022. They are 0.9% higher than in March 2020.

Across prime London, a wider area incorporating most central neighbourhoods plus particularly affluent suburbs, such as St John’s Wood and Hampstead, average sale prices during the third quarter of this year dropped 2.1% compared with the same period last year, said Savills. Prices are 3% higher than in March 2020.

But, just like in major U.S. markets, while prices are holding up reasonably well in central London, the number of deals being done is down.

Stuart Bailey, head of prime sales London at Knight Frank, said transaction levels in October 2023 were 15% down compared with the same month last year.

The reason is that buyers are out to bag a bargain, while many sellers are holding out for a great offer, said buying agent Jo Eccles, managing director of Eccord. “PCL is really resilient, a lot of people don’t have any borrowing, and owners can afford to wait,” she said. Buyers, meanwhile, want a good discount. “London is not a compelling investment at the moment,” said Eccles.

Bailey said the performance of London’s prime market can be split into three categories. The first is homes priced at $3.75 million or less, a needs-based market of mainly domestic buyers. The second is the $12.5 million-plus super-prime market, dominated by globally wealthy and risk-averse investor buyers. These two sectors, Bailey said, are still trading well.

The market between $3.75 million and $12.5 million is flagging. “This is a highly discretionary sector, and it is the bit which is being squeezed,” he said.

Whatever the price bracket, Camilla Dell, managing partner of buying agency Black Brick, said that homes she describes as “best in class” still attract multiple bidders. These, she said, are properties on sought after streets and garden squares, in immaculate condition, with great views and good light. “They are properties which are without compromise,” she said. “They rarely come up for sale and are always competitive.”

Will Pitt, senior director at U.K. Sotheby’s International Realty, has seen the same trend, with American buyers in particular eager to take advantage of the weak pound. “Favourable exchange rates have enhanced London’s appeal for overseas investors,” he said.

Turnkey homes are in particular demand among time-poor buyers, said Pitt. “This marks a change from pre pandemic trends, likely driven by soaring construction costs and labor shortages,” he said. “We expect this focus on minimising renovation costs to intensify moving into 2024.”

Sophia Lucie-Smith, 36, believes the fully refurbished four-bedroom, four-bathroom townhouse in the Chelsea neighborhood that she bought in 2020 (she declined to disclose the purchase price) and shares with her 8-year-old daughter, Petra, meets the best-in-class criteria.

She has decided to sell the property so she can spend some time living in California, where her mother lives. In November, she listed the property for $9.9 million with Sotheby’s International Realty.

“I am conscious about the market but I think this is a really special house,” said Lucie-Smith, a nutritionist. “There is not a huge amount of good stuff on the market.”

The other homes that trade well are those that look like good value for money. “Buyers want a discount,” said Eccles. “To sell a home which is not so special you have to be bold on pricing, and if you are, then you will get interest and buyers may then bid the price back up.”

Sensible pricing is the Denekamps’ strategy. Their home’s asking price breaks down as $1,315 per square foot. Denekamp said he has seen other homes around the docks achieve $1,749 to $1,875 per square foot in recent months.

“I think it is at the cheap end of sensible,” said Denekamp. “We don’t want to sit and wait and talk about the five million pounds we could have got for it five years ago. We don’t have any children to leave it to, and we could wait 10 years for the market to change.”


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Hong Kong Takes Drastic Action to Avert Property Slump

The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

Fri, Mar 1, 2024 3 min

Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.


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