Headwinds

• Stamp Duty more than doubling.
• Mortgage interest relief on rental investments removed.
• Inflation hitting 11.1%.
• Interest rates rising from 0.5% to 5.25%.
• 3 general elections; 5 prime ministers.
• Brexit/Corbyn/Truss/Covid.
• General weakness in global markets.
• Geopolitical turmoil.

Tailwinds

• Sterling falling 15% against US dollar.
• Critical undersupply of housing stock.
• Rents rising by around 20% on average against pre-pandemic levels.
• High levels of cash purchasers.
• Robust super-prime sector.
• Noticeable inflows from US; steady demand from Mid-East.

DOMESTIC MARKET

Headwinds

• Rising mortgage rates from late 2022.
• High energy costs following Ukraine invasion adding to squeeze on household budgets.
• Additional inflationary pressures adding to cost of living challenges.

Tailwinds

• Extremely strong labour market.
• Government support (Help-to-Buy and Stamp Duty holidays.)
• Mortgage rates falling to 1% and availability of five-year fixes.
• New stress test rules from 2015 to prevent excess bank lending.
• Banks’ support for borrowers leading to minimal repossessions.
• Continued trend of equity passed down generations (Bank of Mum & Dad.)
• Forced savings due to Covid impact plus Government financial support (Furlough, etc.)

OUTLOOK

• Relatively benign political outlook, with assumption Labour Government wins election in mid/late 2024 (*relative to other elections/political changes around the world).
• Inflation falling nearer to bank official 2% target by end 2025.
• Base rates to start falling by mid-2024.
• Competitive lending market.
• Sterling to strengthen as US dollar weakens.
• Number of new-builds falling to near all-time low.
• Higher stress-test levels restricting domestic market as well as the impact of fixed-rate loans ending.
• Some easing of super-prime sector as buyers await clarity on Labour’s plans for Non-Doms, etc.
• London property prices presenting both value and cyclical opportunity against other key prime markets (Singapore, Dubai, Miami, Mumbai etc.)

Sticking Our Neck Out (How things might look in two years’ time)

• Base rates close to 3-3.5%.
• Prime Central London gross yields stabilise at circa 4%.
• Nationwide residential yields in mature sectors 6-6.5%.
• Sterling 10% up on the US dollar.
• Inflation volatility not quite tamed but managed within a reasonable range.
• UK domestic politics seen as stable and centrist against more general turbulence worldwide.
• House building still lagging way behind target as changes to planning rules drag out.
• Geopolitical uncertainty to continue.
• Significant numbers investing into Prime Central London once more, as commentators acknowledge and report on recovery.

In Conclusion…

Calling a recovery in 2024 may seem a little premature, but we feel this is a classic situation where the early bird catches the worm. If 2025 proves to be the year where we see the market turn decisively, it will be a moment in which opportunity remains tight and competition is especially fierce. Anticipating and acting early will pay dividends.

OUR NEWS

We start 2024 on the back of a year just gone that exceeded all expectations. It got off to a great start as we let all our 1, St James’s flats within 3 weeks of launch at or well beyond our target rents, hitting £126psf on the top floor. We achieved some other huge rents amidst stiff competition for the very best. £8,500 pw in Notting Hill, £9,200pw in Kensington, and £11,500pw in Knightsbridge.

Our acquisitions side felt like another era. It was great to be buying in our personal favorite area in Onslow Square, Onslow Gardens, and Cranley Gardens. We also bought in a few new schemes in specific areas/schemes we tip to do well such as N1, N8, EC1, and Battersea Power Station.

Our design/build projects ranged from a family house close to Battersea Park to a small block of flats in Marylebone. Projects in Covent Garden, South Kensington, Notting Hill, Holland Park, Chelsea, and Belgravia meant we had our patch pretty well covered!

We achieved record prices per square foot on two flats we sold separately in Kensington as well as in a block of flats we developed in West Kensington.

The year ahead has a mouth-watering inventory of projects we will be developing for our clients, a rental portfolio just shy of 100% occupancy, and some acquisition mandates in a market where we feel opportunity exists before a predicted resurgence in prime central London.

NB: I will be in Hong Kong and Singapore in late February (HK 20th to 24th, Sing 25th to 28th) and always delighted to meet if you would like to get in touch.

For more details about No. 1 St James’s Street and other projects, contact Hugh, Patti or Jonny on

+44 (0)20 7349 8920 or email info@obbard.co.uk