October 2016

Calling the bottom of the market

Without doubt, recent falls in Prime Central London property prices are bringing prospective buyers back to the market. And the drop in the value of sterling since the Brexit vote is making UK assets particularly attractive to overseas buyers.

But for all the renewed interest, our clients remain concerned that the market may have further to fall. Certainly, it appears that prices are now better reflecting the fundamentals. Savills calculates that PCL prices are set to fall 9% this year. Immediately before the referendum, prices were 8.1% below their 2014 peak. This correction is beginning to tempt buyers back.

According to Knight Frank, in the eight weeks following the EU vote, there was a 22.1% rise in the number of prospective buyers compared with the same period last year. The estate agency also reported a 19% rise in the number of properties under offer and a 49% increase in the volume of viewings.

But no-one wants to overpay for a property and, amid continuing market uncertainty, many of our clients are looking ahead and asking whether they might be better off waiting for further falls.

The big question, of course, is what happens with Brexit. Will the UK finance sector lose its coveted ‘passport’, its ability to sell products to the rest of Europe? Will a so-called ‘hard Brexit’ see firms relocating from London to the continent? Will an exodus of well-paid bankers and other executives crater demand for prime London property?

The only honest answer is that no one knows. However, given Prime Minister May’s conference announcement that the UK will trigger Article 50 by the end of March, triggering two years of Brexit negotiations, clarity on these issues will emerge by 2019. Certainly, the view of Savills is that prices are likely to be flat over the next two years, before recovering strongly in 2019.

This uncertainty is having an impact on supply. Many prospective vendors are choosing to let their properties rather than sell, while continuing low interest rates mean there is little financing pressure on borrowers.

There is, of course, pressure on developers. Some have responded by rethinking planned developments, redesigning them to include a higher number of smaller units, in response to falling demand for larger – and thus more expensive properties. This is the case with Northacre’s New Scotland Yard site, the FT reports, which is in talks with planners to increase the number of apartments from 268 to 295. So too with the Battersea Power Station redevelopment, which has applied to add 409 homes to the 3,444 planned, by cutting the number of three- and four-bedroom units offered.

Meanwhile, there is speculation that some developers might be looking to cut their losses on new developments, but our view is that any such distressed sales are more likely to be carried out through large-scale transactions with institutional investors, rather than on a per unit basis.

“Opportunities are pretty thin on the ground,” says Camilla Dell, Black Brick’s Managing Partner. “But where we think there might be some smart investments to be made is in what we call the new-build secondary market.”

This is where buyers have paid deposits to buy off plan, and may have made one or more staged payments ahead of completion. In some cases, they may be struggling to finance subsequent or final payments, or may have made a paper profit they are keen to take. “We’re monitoring this part of the market pretty closely,” Dell adds. “Of course, buyers should still only consider acquiring in higher quality developments, where there isn’t the risk of additional supply depressing prices.”

More broadly, our advice would be to be prepared to move quickly if opportunities present themselves. “It’s impossible to predict the exact bottom of the market,” says Black Brick Partner Caspar Harvard-Walls, “but if prospective buyers hang around too long, the risk is it’s like the last day of the Harrods sale. There may still be bargains to be had, but all the good stuff will have gone.”

Apple to put down roots in Battersea – and two unique off plans properties for sale

Despite all the concerns about Brexit, the announcement from Apple that it is to become the anchor tenant at the redeveloped Battersea Power Station represents a vote of confidence in the capital. The tech giant will move 1,400 staff to the site in 2021, taking 500,000 square feet, or 40% of the office space, in the £8 billion redevelopment of the former coal-fired power station.

The announcement is a boost for the wider regeneration of the area. It is likely to attract other tech companies to that part of London, which has seen a rash of high-profile residential developments. Notwithstanding the good news for Battersea, the area continues to suffer from significant oversupply of new build properties, and we would advise clients to be cautious about following in Apple’s footsteps too soon.

However, for those looking to buy an “iconic” piece of history, we currently have access to two very rare and unique off plan properties in Battersea Power Station. A unique duplex 3 bedroom penthouse in Boiler House Square, the most sought after and iconic part of the development, and a 4 bedroom duplex apartment in Switch House West. Both apartments benefit from roof terraces and 1 car parking space each and will have stunning views of the River Thames. Please contact Camilla.Dell@black-brick.com for more information about these two rare off market opportunities.

Stamp duty tax take dashes hopes of budget review

Agents are agreed: the hike in Stamp Duty introduced in December 2014 by then Chancellor George Osborne has been a big factor in the slow-down at the top of the market. So hopes were raised last week by a prediction in The Telegraph that annual receipts from the property tax were set to show a drop as a result of lower transaction volumes.

Such an outcome may have encouraged the new Chancellor, Philip Hammond, to reverse or at least review Stamp Duty rates in his first Autumn Statement, due on 23 November. But figures from the Treasury show that Stamp Duty from houses and flats worth over £1 million was up 19% in 2015-16, to £2.6 billion. The overall figure was down 2.5%, to £7.3 billion, but that was explained by Scottish receipts now going to the devolved government in Edinburgh.

Of total receipts, 46% came from London, with Kensington & Chelsea alone accounting for 7% of the total. The figures will give the Chancellor little incentive to tinker.

Acquisition of the month – York Road, Battersea SW11

We had an open brief on location for our clients – a time-poor couple who had recently relocated from the US – but they had one particular request: a roof terrace suitable for barbeques, which is difficult to find in central London.

We put in the legwork with a search that covered almost every part of London before finding a gem of a property: a fantastic three-bed new-build penthouse apartment in Battersea, boasting a wrap-around roof terrace with stunning views over London, as well as a Jacuzzi hot-tub. We managed to negotiate a £75,000 discount to the asking price, securing the property for a competitive £770/square foot.

Managed Sale of the month – Lansdowne Road, Holland Park W11

Our US clients, for whom we had found a stunning ground and lower ground floor apartment, were moving back home, and wanted to sell their property discreetly, without going to the open market and with minimal disruption. Despite the current subdued state of the market, we found two potential buyers from our network, one of whom was prepared to pay the full asking price, of £8.95 million – 36% above the £6.6 million our clients paid in 2014 and, at £2,343 per square foot, the highest price achieved for a flat on this street.

The transaction proves that a discreet and confidential approach is often the best way to sell a property – and is a prime example of how successful our Managed Sale Service is.