September 2014

Good news for potential buyers of prime Central London (PCL) property as supply increases, vendor confidence wanes

A clear market turning point? With greater room to negotiate with sellers whose initial over-confidence on achievable prices is clearly waning, market conditions in prime Central London (PCL) property have shifted definitively in favour of potential buyers in recent weeks.

According to real estate website Rightmove, the average asking price for London homes which came on the market on its website in August was 5.9% lower than in July. Meanwhile the latest figures from property analytics group Hometrack also point to a more realistic approach to prices from sellers, revealing that vendors in the UK capital achieved just 96.4% of their asking price in August.  Hometrack’s data also highlights how conditions have improved for buyers over the past six months. In February, 87% of London postcodes saw a price increase from the previous month. In August, that figure was down to 11%.

Asking prices now falling across post codes and price bands as realism bites  

As the Hometrack data strongly implies, the softening in market conditions over the past few weeks has been noticeably more consistent across London, with only limited discrimination by areas and by price bands. Only a few short months ago, any weakness that existed was largely focused in London homes valued above £10m and those located in the ‘core’ prime London boroughs of Westminster and Kensington & Chelsea which have witnessed the strongest rises since 2009. Meanwhile, the broader market and particularly the sub £2m-segment and peripheral London locales prospered.

That is clearly now changing. The pool of available properties for sale continues to grow against a backdrop of widespread media speculation about the end to the recent property ‘boom’. Buyers’ reluctance to meet inflated asking prices and a healthy dose of vendor realism have all contributed to more competitive pricing. We have also seen developers prepared to do deals on price to an extent that has not been the case over the previous few years. We expect more flexibility on price over the coming months as additional stock comes to market.

In the wider UK housing market there has also been evidence of a slowdown to the recent market strength as efforts to rein in mortgage lending and concerns about an imminent interest rate rise compete with the confidence engendered by a resurgent UK economy. According to leading mortgage provider Nationwide, house prices across the UK rose 0.8% in August – the sixteenth consecutive monthly rise. However, the widely-watched monthly survey from the Royal Institute of Chartered Surveyors shows new buyer inquiries falling at the same time as new instructions continue to rise. The headline RICS price survey revealed that a net balance of 49% of surveyors reported a rise in prices in July, down from 52% in June and 56% in May.

However demand pool remains deep – growing number of opportunistic buyers eyeing recent weakness with interest

In prime Central London, while the recent strength of sterling and concerns about a mansion tax in next year’s general election have tempered the enthusiasm of a limited portion of overseas buyers, the overall buying pool remains both broad and deep.

London Central Portfolio, a company which runs a number of funds investing in PCL property, recently said its latest fund would take advantage of “a rare chance to make opportunistic acquisitions in a less competitive environment” in the run-up to the UK’s general election.

LCP is far from the only institutional buyer to see the current conditions as a potentially attractive entry point in a long-term context. Meanwhile, new client sign-up at Black Brick remains strong and geographically diverse as the headlines about recent price weakness also encourage opportunistic individual buyers. Our belief is that while vendors’ confidence may be waning after a protracted period of strong prices, London’s attractions as an international financial centre, business hub and leisure destination are hardly disappearing overnight.

In its latest annual survey, business and lifestyle magazine Forbes once again hailed London as the most influential city in the world. Calling London “a preferred domicile for the global rich”, Forbes highlighted the City of London’s “unparalleled legacy as a global financial capital”, and London’s broader status as a “powerful media hub and major advertising centre”. According to Forbes, London is “the birthplace of the cultural, legal and business practices that define global capitalism”.

Strong new client sign-up suggests completion volumes to accelerate in the run-up to year end 

Importantly, with both the European vacation season and Ramadan now over, we expect the coming weeks to be busy in the run up to Christmas and the end of the calendar year. The overwhelming majority of our clients are keen to complete within this timescale.

However, for both buyers and sellers, this is an increasingly difficult market to negotiate without specialist advice and expertise. For both sides, the key question is, of course, the right price for any given property when market forces are in a constant state of flux. At Black Brick we have seen a noticeable pick-up in demand for our Managed Sale service from overseas investors keen to maximise their price without having to deal with the hassle of organising and overseeing the sale themselves. For buyers, it is our deep market knowledge and proven negotiation skills that are saving our clients’ money.

Property acquisition of the month: South Kensington mansion flat perfection….at a discount

September’s property acquisition of the month is a truly stunning apartment in Drayton Gardens, South Kensington and a case in point. Our international clients were looking for a pied-a-terre providing a quiet and safe ‘lock-up and leave’ apartment in Central London. As they only spend a limited amount of time in London high on the list of their requirements was a building with a porter, located close to shops and restaurants and a property with little decorative work required.

The apartment we sourced for them in SW10 ticked all the boxes. Despite the fact that the flat had recently been stripped back to the shell and meticulously refurbished by the vendors, Black Brick successfully agreed the purchase of this truly unique mansion flat £150,000 below the asking price.

We are now providing further support to the client through our Vacant Care service specifically designed for overseas clients.