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Half-Term Report - Expert H1 Market Commentary and H2 Predictions Part 1

Luxury Property

The mid-point of any year presents a unique opportunity to reflect on the months that have passed and anticipate what still lies ahead this year. We asked some of our leading finance experts to share their insights from their areas of specialism, responding to two critical questions;

Q1 Reflecting on H1, what have been the most significant trends or changes you've observed in the market?

And

Q2 In H2, how do you expect these needs / demands to change and what other challenges and opportunities do you envisage? 

As revealed in our H1 Highlights release, at a group level we have seen year-on-year growth in enquiries during H1, accompanied by an increase in borrower quality, net-worth and property value. These trends are very promising for the second half of the year, which we anticipate will also be influenced by the upcoming US election in November, market stabilisations and a robust global super prime property market. Business investments also look likely to recover slightly, although consumer spending may remain cautious in many markets.

Below is a summary of our team’s insights.

 

Super Prime Lending – ‘high-value enquiries have grown year on year’

Chris Lloyd

Partner

Q1 For HNW buyers seeking super prime property, it’s clear London remains hugely appealing. We’ve seen high-value enquiries grow year on year, as highlighted in our H1 report. Demand for trophy homes in traditional heritage hotspots such as Mayfair, Chelsea, Belgravia, and Knightsbridge remains robust. Although interest has also grown in other areas of prime London as well, perhaps buoyed by the popularity of the Netflix show ‘Buying London’. International enquiries from overseas buyers, especially from the USA and Middle East, also remained strong .

Q2 Although the UK now has a new government, it remains to be seen what changes they may bring to the legal, tax, and regulatory environment underpinning high-value property transactions. In the short term, I envisage little changing, especially at the typically resilient super prime end of the market. Therefore, it is likely the appeal of London and the UK as a politically stable G7 nation, with growing levels of consumer confidence, will strengthen further. But it’s also important to note that the current 16-year high interest rate peak is expected to come to an end in H2, and will likely gently spark mortgage demand at all levels of the market.

Specialist Lending – a shift from ‘wait and see’ to ‘let’s do this’

Chris Whitney

Head of Specialist Lending

Q1 The keyword I have been hearing from HNW clients in this space so far this year has been flexibility. The sentiment from clients has been very positive. However, with political uncertainty and false starts with potential interest cuts, many clients have been keen to keep their funding arrangements agile and adaptable. This has led to a significant increase in the Short-Term Specialist Lending arena (my preferred name for ‘bridge lending’) in terms of volumes. The incorrect assumption for many is that this type of funding is prohibitively expensive when the reality is this isn’t the case.

Competition in the sector and relatively high base rates make this type of funding a very useful tool to have at your disposal. Quick to implement, higher geared options available and often no exit fees makes this an attractive proposition for clients globally.

Q2 I believe we are already seeing signs of a shift from ‘wait and see’ to ‘let’s do this’. The first shoots of activity seem to be in the development space, for both residential and commercial schemes. We are seeing certain parts of the UK that have seen very little activity really coming to life in just the last few weeks with developers and investors mobilising ready to start on site as soon as possible.

With the new administration giving assurances over planning flexibility and lifting some current bans, this will seemingly promote this activity further. As this activity flows through to the rest of the economy, I think we will see positive progress in the rest of 2024, but the wider population may not see the benefit of this until 2025.

Corporate Finance – ‘we’ve seen confidence returning to the market

Scott Monks

Head of Corporate Finance

Q1 We’ve seen confidence returning to the market in terms of both borrowing clients and lenders. Buoyed by reducing inflation now back under control, and the reduced cost of funds, matched by a growing market expectation that interest rates will start to come down. It is undeniable that the Labour victory also provides optimism and arguably more stability in the UK, especially when perceived on the global stage compared to other G7 nations. Furthermore, we’re seeing consumer spending rebounding and sterling growing in strength, all of which are providing encouragement to businesses focusing on both home and overseas markets.

Q2 Looking to the second half of the year, we expect these trends to continue, especially after the summer recess. Other factors are the growing level of venture capital in the UK and labour’s desire to support keynote commercial sectors such as fintech, which may also lead to more stock market listing activity. All of these will further improve confidence and growth, suggesting a good time for businesses to consider how to fuel growth as the market rebounds.

More expert commentary and predictions from our other heads of departments to come soon...

 

VIEWS EXPRESSED

The views and opinions expressed in this piece are those of the author:

-        and do not constitute advise or a recommendation

-        and do not necessarily reflect the official policy or position of Enness

-        and are not intended to indicate any market or industry viewpoints, or those of other industry professionals