Over the last two years, there has been a sharp increase in wealthy buyers in London selling and buying off-market. Estate agent Hamptons International released research that shows off-market sales account for 25% of sales over £1 million in London. This is up from 14% just four years ago and shows how much off-market has become part of the asset protection strategies used by wealthy investors and buyers in the UK.
One in four homeowners are choosing to sell their property without advertising online or in estate agent literature. Behind this increase is widespread concern about the contracting market. Increasingly, the best way for wealthy buyers to find the ideal luxury property is behind closed doors.
Asset protection strategies
Brexit and recent legislative changes have led house prices and transactions to fall since 2016, leaving the sector in disarray. Wealthy sellers and buyers have lost clarity on realistic pricing and demand, thanks to the contrasting media reports and an uncertain economy. Off-market selling is part of the asset protection strategies used by this level of buyer and seller.
Rather than taking the risk of a public launch of their sale, sellers are asking agents to discretely approach potential buyers. This allows them to get a feel for a price point without publicly having to drop the price and influence perception of their luxury property.
Johnny Morris, Head of Research at Hamptons International, says: “If you make your home available to buy quietly you can see if you can achieve the price you want without having a public record. Part of this is about sellers wanting to keep their options open.”
Off-market affects luxury market
The off-market share across the country also increased from 14% in 2014 to 20% in 2018. Unsurprisingly, the figures also show that these off-market sales overwhelmingly concern the top end of the property market.
In London, just 0.9% of off-market sales concerned properties priced at £500,000 or less over the past year. At the upper end of the scale, 27% of all off-market sales were for properties worth £2 million or more. Wealthy homeowners are driven to sell privately to test out the potential value of their property, and it assuages the traditional worries of the wealthy – security and privacy.
If a property doesn’t sell publicly, then owners can remove it from the market before later targeting selected parties at a lower price. This avoids the new targets from seeing the previous price online.
Supply and demand driving off-market sales
Off-market selling is even more attractive to the super-rich. For properties worth over £10 million, the pool of potential buyers drops significantly. Agents typically know who may have an interest, or who is looking for a specific property.
Selling in this way makes an expensive home accessible only to those who could realistically afford it and are serious about making offers. Director at buying agent Huntly Hooper, Oliver Hooper, says that there is a “massive imbalance” of supply and demand in the high-end property market in central London. This has led to a clear trend among transactions completed by clients in London. He says: “In 2016, about 60% of my deals were off-market. For the past two years, the proportion has been 100%.”
Keeping identities secret
The secrecy of off-market sales can run deep. For example, when a wealthy Middle Eastern woman wanted to find a property in London, estate agent Carter Jonas was able to recommend a period home priced at more than £50 million.
While the property had never been publicly for sale, with no for-sale sign or listing with an estate agent, its owners had simply told Carter Jonas that they wanted to sell. The buyer ended up going through a purchase process using a company structure that meant even her identity was kept secret.
James Turner, Managing Director of Turner Little Limited says: “Prices and access to serious buyers are important factors for off-plan sellers and buyers, but their most important priority is privacy. This is becoming more difficult to maintain since both our Government and those of other countries have stepped up measures to fight money laundering in the real estate sector.
“The Government has signalled its wish for a tougher stance on people who use property to hide the proceeds of crime. This was shown by the reveal in October of the wife of an ex-chairman of an Azerbaijan bank as the first unexplained wealth order after she acquired assets that include a Knightsbridge property worth £11.5 million. These orders oblige the subject to explain to the National Crime Agency how they can afford the assets, and if they can’t, their assets can be seized.
“Measures like this won’t stop off-market sales for the wealthy, but they may cause some buyers concern. With an increasing focus on the wealth gap in the UK during this uncertain economic period, the uber-rich often want to hide their massive transactions from a public that could be hostile.”
About Turner Little
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