Seasonal Trends in the Prime Central London Property Market in The Year 2024

Real estate in Prime Central London (PCL) has turned into a very sensitive ecosystem that responds to a full bouquet of stimuli that ranges from a change in economic policies to global happenings. As 2024 came into view, property experts like estate agents in Chelsea say it is obvious that the market has been very tentative—literally treading water—and will continue in that direction, with big policy changes and economic uncertainty at its core. This article presents an update of some of the key factors defining market dynamics and what is to be expected moving into the future.

Economic Background and Change in Policy Rates

Inflation and Interest Rates The end of 2023 had a bigger fall in inflation than was expected, and this, for a while, created some optimism in the property market. By Christmas, the money markets were discounting the impacts of five 0.25% cuts in interest rates over the course of 2024. This optimism, however, was short-lived. Underlying inflation has proved rather more stubborn than had been expected, and mortgage rates have bounced back, reducing buyer confidence and affordability—putting down a more cautious market.

General Election and World Activities The general election in the UK that is hanging over increased the sense of unpredictability and again is something that a general election promotes. Political instability beclouds markets, and this election has proved to be no exception. World activities do not help. Military activity overseas has placed a further market in the investor’s mind and on economic stability.

Abolition of the Non-Dom Tax Regime Arguably one of the most significant policy changes in PCL in 2024 is the abolition of the non-domiciled tax regime; effective as of April, persons with non-dom status could enjoy up to 15 years without paying taxes on their worldwide income. The new policy will introduce a four-year tax-free period for new arrivals, after which they will be taxed like any other UK resident. This is estimated to raise £2.7 billion annually by 2028/29, but it also includes a two-year transition period within which current non-doms will only pay 12% on their worldwide income. This is bound to have an impact on the property market, perhaps raising activity in London’s most expensive postcodes.

Market Performance and Buyer Sentiment

Price Movements As of February 2024, PCL experienced an average annual price decline of -2.4%, whereas POL was -1.6%. These statistics underline a market still shrouded in uncertainty, with prices that reflect the cautiousness of buyers and investors.

Buyer Activity The underlying demand and buyer interest were positive on the whole. According to Knight Frank data, the number of new prospective buyers in February was 9% above the five-year average. This registered a fall from what was recorded in the month of January, and therefore it meant that as the year progressed, buyer interest had somewhat moderated. The number of offers, another important indicator of buyer sentiment, was more muted. In January, it was 1% above the five-year average; in February, it was 12% below, flagging greater wariness among buyers as mortgage rates have nudged higher.

Sale Instructions and Market Appraisals In the month of February, the number of sale instructions went up 9% compared to the month before, which recorded a 5% increase. The driver here was largely the fact that a higher number of market appraisals were done in the month of January. February’s market appraisals at 3% were considerably lower compared to that of January, which recorded 13%. These trends suggest that while there is keenness on the sellers’ end to advance into the market, this is being resisted by wider economic uncertainties and fluctuating buyer interest.

Outlook for Buyers and Sellers

Bank of England’s Role The position of the Bank of England, its actions, and communication are still going to hold center stage for buyers and sellers. Even if it is quite unlikely that it is going to cut interest rate within the coming months, its statements and policy views are important for conditions in the market as it proceeds into the future. Decisions and policies of the central bank are going to be the biggest driver of buyer sentiment and, more generally, of market composition. This is going to impact affordability and investment strategies.

Long-Term Outlook In the time ahead, the PCL Performance of the property market is going to be hinged to several factors. First, political uncertainties are going to clear after the elections. This is likely to act to normalize the markets. Global economic headwinds will also stabilize, and the impact of the new tax policies will be visible. Plus, the international buyers’ response, more specifically to the non-dom tax changes, will matter. If it can navigate through them successfully, there will be recovery and growth in the second half of 2024.

Key Takeaways

  • Economic Fluctuations: The cautious market environment created because of high inflation and fluctuating interest rates.
  • Policy Changes: One big change, that of the non-dom tax regime eradication, is likely to drive activity in the high end in the short term.
  • Buyer Sentiments: Mixed indicators point towards a cautious sense of optimism as buyer activity continues to fluctuate in response to the economic indicators.
  • Market Dynamics: Sellers’ enthusiasm remains muted by economic uncertainties as reflected in a variable number of market appraisals and sale instructions.

It can, therefore, be concluded that 2024 witnessed a crucial change and prevalence of uncertainty within the Prime Central London property market. The relatively positive situation in terms of buyer interest and possible market boosts due to policy changes is, however, treated with caution. Going forward through the year, stakeholders would continue to keep a critical ear to the ground on economic indicators, policy developments, and how the markets are responding, all with a view to helping in decision-making in this dynamic landscape.

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