Category Archives: Op-Ed

Price growth to slow in 2014-15 but surge after the election

Prime Central London (PCL) house prices will grow three per cent in 2014, followed by two per cent 2015, according to a leading London property consultancy.

After the forthcoming general election however, consultancy Strutt & Parker predicts prices in PCL to rise 6.5 per cent in both 2016 and 2017. Meanwhile, its predictions for homes across the UK as a whole are more bullish – nine per cent growth in 2014, followed by five per cent throughout 2015.

These forecasts are a stark contrast to 2010 and 2011 when PCL prices surged by over 13 per cent year-on-year.

Whilst improved economic foundations would certainly suggest that prices will continue to rise over the next few years, the biggest perceived uncertainty surrounding the property markets over the remainder of 2014 and 2015 will continue to be the looming election.

Stephanie McMahon, Head of Research at Strutt & Parker, explains: “Agents are reporting a continued slowdown in some areas as buyers and sellers nervously await news on the upcoming General Election and the potential for Mansion Tax. This is beginning to feed through into transaction levels. As is often the case in uncertain times, it may also be that transaction levels will decrease in the run up to May 2015, but values could hold up better than expected.

“Above and beyond the General Election there are a number of other potential headwinds slowing the property market, including talk of interest rate changes and the Mortgage Market Review (MMR) and the slowdown it is causing.”

“The main driver for price market price growth in recent years has indeed been the consistent shortage of good quality housing stock in highly sought after prime locations. Any future increase of supply to the market in central London would therefore put downward pressure on PCL house prices and we have taken this into consideration in our London predictions.”

Prime Central London – which sector of the market will you find bargains?

There are bargains to be had in Prime Central London if you look beyond stamp duty, an independent property consultant with more than 25 years’ experience said in October.

Following the 2012 budget, stamp duty for properties sold over £2million rose to seven per cent. Since this announcement, sales of homes in the £2-£2.5million price bracket have fallen by over 30 per cent, but in contrast, homes valued under £1.5million fell by just 3.4 per cent, according to agencies’ analysis. Additionally, more than half of all properties in London’s Prime Central areas have been withdrawn unsold in the six months to the end of June, according to further research.

A leading property consultant commented “The £2-£2.5m sector of the market provides a real buying opportunity because people are reluctant to pay more stamp duty. There is a real psychological barrier to passing this mark, despite ability to access the £2-2.5m market – where we are seeing some significant reductions in price.

“Recently, a client of mine provided me with the brief – a three bed investment property in the Knightsbridge area for less than £2m. Knowing the clients taste I knew it was going to be tough, finding a two bed with his requirements would be achievable but a three bed would be a stretch.

“After showing him properties on the market in line with his brief, we had a frank discussion about surpassing the £2million mark. Soon after, I took him to see a £2.5million property, which was being sold off market which he wanted to put an offer in for. Following tough negotiations, the property was brought for £2.1million. This deal was possible as this area of the market, £2m plus, has slowed right down and in order for vendors to sell they have to be realistic about market value. Buying agents, like myself, are far better placed than estate agents to secure these deals as we prefer to work off market as we aren’t representing the vendors.

“With Labour plans for a Mansion Tax now in the open, it’s likely that properties above £2m are likely to see further reductions, so I expect to be able to identify real value for clients looking in this range.”

Why purchasing prime real estate in London can be a postcode lottery

New research on postcode sectors in Prime Central London (PCL) ranks SW1 X in Belgravia as most expensive, whilst W1 D and W1 F in Soho has the highest long term growth history and W1 T and W1 W in Fitzrovia win top investment postcodes.

A snapshot of the PCL residential property market, made up the Royal Borough of Kensington and Chelsea and the City of Westminster, reveals that the average house price reached £1,552,400 in the first quarter of 2014, said specialist investment advisor LCP in June. Prices have increased on average 10.64 per cent per annum over the last two decades or so, since Land Registry records were first published in 1996.

LCP added, however, that even within the small designated area of PCL, average prices and long term growth vary significantly amongst the 200,000 properties located within it.

It comes as no surprise that LCP’s careful analysis shows that postcodes located within the international heartlands of Belgravia, South Kensington and Knightsbridge reign supreme in terms of average price. The SW1 X(7,8,9) area of Belgravia posted the highest average price £4,405,741. This rose from second place pre-credit crunch, replacing the SW3 6 postcode in Chelsea, which at £3,448,195 is now rated as the third most expensive.

In second place is the SW7 (1,2) postcode in Knightsbridge, around Ennismore Gardens and Imperial College with an average price of £4,064,674. Reflecting the vast price diversity in PCL, the SW1 V3 area of Victoria that runs alongside the River Thames posted the lowest average price of £593,600, almost 7.5 times lower than the most expensive postcodes.

In terms of best long term investment, LCP has identified that W1 (T,W) in Fitzrovia, which runs between Portland Place and Tottenham Court Road, as the number one spot. An area that has been historically under-priced and over-looked compared with other places in PCL, it has an average price of only just over £1m (£1,132,089) whilst enjoying long term annualised growth of 12.37 per cent per annum.

Foreign investors show increasing appetite for London new-build property

Foreign investors have snapped up 65-70 per cent of new-build homes in prime London over the past two years, according to research by one of the capital’s leading property agencies.

This international appetite has allowed the new-build sector to remain buoyant, with average new build residential prices in London rising by 56.3 per cent between Q1 2009 and Q2 2013, according to Chesterton Humberts.

As well as Chinese, Russians and citizens from the Middle East buying for lifestyle reasons, there is now evidence that buyers from these countries are now also purchasing primarily for investment purposes. New nationalities becoming more active in the London property market have also been identified, including Nigerians, French and Greeks, due to political strife, economic difficulties and tax threats to personal wealth.

London’s established safe haven status, combined with its legal transparency and the good long term performance of its property market, means that it features on many international buyers’ wish lists. Price growth has been particularly strong over the past few years with Nationwide reporting that average new-build capital values have risen by 47.7 per cent since 2009, while the average premium for luxury new build property in London can be anything from 10 to 15 per cent and in some cases considerably higher.

Chesterton Humberts’ Head of International Residential Developments, Samuel Warren, highlighted that there was £2.2-billion of investment in luxury new-build homes last year and expects this figure will be exceeded this year: “With demand for prime new build properties set to remain robust and new supply struggling to keep up, we expect investment volumes will be higher this year than last. The relative weakness of sterling means that many overseas buyers can achieve effective discounts on purchase price whilst acquiring an asset that will almost certainly appreciate considerably over time and which they will have little difficulty in selling when the time comes.”

East London says ‘Bonjour’ to more and more foreign buyers

France’s harsh tax regime and struggling economy means that interest in London property among French people continues to grow, so that the French population in the capital has increased by 75 per cent over the last ten years.

There is also evidence that East London is a growing hot spot, says London property consultancy Hamptons, so that the French population there is now 85 per cent of that in West London, the area traditionally popular with wealthy settlers from across the Channel.

The capital’s biggest proportion of French people lives in Kensington and Chelsea, where they account for about four per cent of the total population in the borough, compared with an average for London of just 0.5 per cent. South Kensington in particular is a popular and established community – often dubbed the ‘21st arrondissement’ – with French schools a tribute to the commitment to staying in the UK.

But French communities are now growing in other parts of London too. As house prices in the SW7 area become out of reach, the French are moving to other areas where house prices are lower. French schools have sprung up in Clapham, Camden, Ealing and Fulham to accommodate this trend.

But what is more surprising is the growing popularity of East London to the French – now a hot spot for growth in London’s French population. Tower Hamlets – home to Canary Wharf and Spitalfields – has a French population three-and-a-half times higher than 10 years ago.

Similarly Hackney and the City of London have seen the French population almost triple. Indeed, the combined population of French people in these three boroughs is 85 per cent of that in Kensington and Chelsea. The French now account for about one per cent of the overall population in these three boroughs, still well above the average for French in the capital as a whole.

Prime London real estate now 60 per cent above lows of downturn

Property prices in prime central London (PCL) continued to rise in July and now stand almost 60 per cent above their financial crisis low in March 2009, according to a leading London property agency Knight Frank.

Property prices in PCL increased again in July, up by 0.5 per cent month-on-month. This means that so far in 2013, prices for the very best homes in London have increased by 4.2 per cent. In spite of new record prices, interest among prospective buyers remains high, as property viewings in PCL over the year-to-date are up by 15 per cent compared to the same period in 2012, said the agency, adding that the number of new applicants is up by a similar level. Rising demand has translated into higher sales volumes, up by 8.2 per cent year-on-year.

Key factors driving price growth and interest include the city’s reputation as a safe haven for investment, the strength of global equity markets and the value of the pound. The further weakening in Sterling in the first half of 2013 helped to boost overseas interest and domestic demand has been aided by London’s economic recovery and arguably from the Government’s Help to Buy scheme, which was launched at the end of Q1 this year.

While Help to Buy, with its £600,000 valuation cap is a more significant factor in the wider mainstream market, rising housing market sentiment is infectious across markets and price brackets, and is likely to act as a positive influence in terms of future pricing even in London’s prime market segments.

There remain differences in performance between locations and price bands across PCL. In July, property in the sub-£1m bracket increased in value by 1 per cent, while homes in the £1m-£2.5m price bracket climbed 0.6 per cent. Comparatively, the price of ‘super prime’ £10m+ homes remained unchanged over the course of the month.

In Marylebone for example, where property values have climbed by 4.7 per cent over the year-to- date, interest and activity in the sub-£3m market has been the primary driver of these price rises.

Sporting bonanza injects feel good factor into property market

Hosting the 2012 Olympics has been a huge commercial success – worth around £10billion – for London and the South East, according to figures out this week, and the effect has helped to fuel growth in the city’s property market.

This year, even more sporting success is helping to drive a feel good factor across the UK, according to a leading national estate agency, which said that the British and Irish Lions in Australia and Andy Murray’s victory at Wimbledon, combined with the sunshine, have had a positive effect on the housing market.
England’s first match win in the Ashes will only add to this.

The fact that most homes look more appealing in the sunlight and that house hunting when the weather’s fine is a more pleasurable experience means those wishing to sell should keep one eye on the long-term weather forecasts, added the agency.

The market boosting weather is also backed up by the stats. Demand from would-be homebuyers picked up at its fastest rate in nearly four years in June, according to the survey of sentiment from the Royal Institution of Chartered Surveyors.

However times of sporting success and high morale in the UK aren’t always coupled with good performance in the housing market. Last year, during the Olympic success, the housing market slowed down due to people staying in being glued to their TVs.

Reflecting a more positive mood, a net balance of 45 per cent of surveyors expect home sales to rise over the coming three months, up from 36 per cent in May and the highest reading since the survey began more than a decade ago.

London penthouse market reaches dizzy new heights

Penthouses now account for sales worth more than £1billion a year and represent a booming sector of London’s property market, according to research by a leading international property advisor.

Penthouses are being developed across London, but vary dramatically in price, although it is now impossible to buy a penthouse in the capital for less than £1million, the same research by CBRE showed. While it is possible to find penthouses priced between £1.5million and £3million in Islington and Camden for example, in prime Central London the starting point for penthouses is closer to £4million. In the most desirable boroughs prices average £13million and can easily top £4,000 per square foot.

On average, penthouses sell for a 60 per cent premium over the rest of a development, and can account for 20 per cent of a project’s gross development value.

Mark Collins, CBRE head of residential, commented: “Penthouses of the quality on sale in London now cement our capital’s new status as a home-from-home for the super-rich as well as providing an invaluable store for their wealth. With the burgeoning volume of billionaires in the world and the increasingly international appeal of prime London real estate we anticipate that the penthouse market will continue to be a very exciting and elusive space going forward.

Other findings from the research showed that penthouses these days have a range of features, including a private entrance or lift, a library or office space and additional suites for guests or staff. It’s not unusual for buyers to demand strong security measures, such as bullet-proof windows, a panic room and even retina recognition systems.

The most requested features by penthouse buyers in London are: high floor-to-ceiling heights, with glass wrap-around; generous outdoor space – up to 20 per cent of the floor area; luxury specification, notably better than the rest of scheme; being at the top of an iconic tower and designed by a leading architect; top appliances with ground-breaking technology; a broad range of facilities and additional amenities in development; state of the art security; spectacular views over the city or a park; location, location, location!

More prime London homes being bought by foreigners than by Britons

Foreigners have overtaken Britons as buyers of desirable London homes after research showed they bought more than half of prime residential homes sold in the capital in the past year to April 2013.

A report by international estate agent Knight Frank showed that overseas buyers accounted for 52 per cent of all £2million-plus residential properties sold in prime central London (PCL) between March 2012 and March 2013. The surge in sales to foreign buyers was led by citizens from Russia, China, the US, the United Arab Emirates and India.

In terms of market share, Russians bought 8.5 per cent of £2million-plus London homes sold in the year to April 2013, followed by buyers from the UAE, US and China, with each accounting for 2.8 per cent, while India accounted for 2.6 per cent, Hong Kong 1.8 per cent and Switzerland 1.1 per cent. Sales to citizens from Eurozone countries as a whole accounted for 9.5 per cent.

The same report showed that there is more buoyancy in the £3million-plus market than the £2million-plus market. During the year to April 2013, the number of properties priced between £2milion and £3million fell 16 per cent year-on-year, while sales of £3million-plus homes were steady. The increase in stamp duty on sales of property over £2milion to seven per cent from five per cent and the introduction of a 15 per cent charge on sales through offshore companies are likely to have caused this effect.

The attraction of prime real estate in London has been strengthened by the UK’s low interest rates, weaker Sterling and the appeal of owning an immovable Sterling asset in a buoyant and desirable destination.

Appetite for London property at pre-credit crunch levels

Demand for residential real estate in London grew three times faster than supply during the first quarter of 2013 and is now at levels not seen since October 2007, just before the financial crisis triggered a property crash.

Figures from property analyst Hometrack also showed that homes in London were typically on the market for just 4.6 weeks in April, which is nearly half the period of more than eight weeks seen at the end of 2008, regarded as the peak of the financial crisis. In addition to that, the proportion of the asking price achieved in the capital was over 95 per cent in April – a level also not seen since summer 2007.

Land Registry market data released this week reinforced the bullish state of London’s property market, highlighting that the average selling price of a property in the capital has reached a new record of £374,568. In the desirable borough of Kensington and Chelsea, the average property price has risen by 12 per cent since March 2012 and now stands at £1.1million. Prices across the whole of London grew by nine per cent last year.

“There’s little doubt that demand from foreign buyers investing in London property, which they see as a secure immovable asset during turbulent economic times, is contributing to this on-going growth in value,” said international property specialist Julian Walker of Spot Blue. “Prime and super-prime properties in particular continue to appeal to high net worth individuals from ailing Eurozone nations, as well as the Middle East and Russia. Another recent report by Knight Frank proved that London property is seen as a safe haven asset – while prices of luxury property continue to rise there, the average price across all international cities has been falling.”