12th January 2017
9mins
Taking the long view on London property
According to the consensus view of the UK’s leading property analysts, we’re in for an unexciting year in the Prime Central London market. Most believe prices will move sideways – or, at most, rise or fall by a percentage point. After the events of the last 12 months, however, we – and many of our clients – are braced for more uncertainty in 2017.
For London property, of course, the big questions relate to Britain’s exit from the EU – and answers may take the best part of two years to emerge, once Prime Minister Theresa May triggers Article 50. That move, which begins the negotiation process, is expected by the end of March. The terms of the UK’s new relationship with Europe, especially around financial services, could strongly influence London property prices.
Other uncertainties lie around the corner: the outcome of elections in France and Germany later this year could throw the EU into fresh crisis, sending the euro lower but perhaps increasing the attractiveness of non-euro property investments. Across the Atlantic, the economic policies introduced by Donald Trump in the US could see the dollar rise substantially, making London property even more attractive to dollar-based buyers.
But there is a large amount of sand in the gears of the London market. Falling prices in recent years are deterring all but the most determined seller. Hikes to Stamp Duty – particularly in the £2-6 million part of the market – have substantially increased transaction costs. As prospective PCL buyers will be painfully aware, Stamp Duty on a £5 million property now comes in at over £500,000.
With tax at this level, buyers are extremely cautious about this part of the market. Without big rises in prices, buyers would find themselves nursing substantial losses, once tax outlays are factored in, if they are forced to sell.
This nervousness is understandable. But we would suggest that there are nonetheless opportunities to be had, for the committed and fleet of foot.
First, while there is less supply coming to market, those who are selling are highly motivated, and vendors now know that they have to be realistic on pricing, and be prepared to negotiate. This means that buyers can strike bargains.
This is especially the case for cash purchasers. They are able to move more quickly that those seeking finance, as they aren’t subject to mortgage providers’ valuation processes – making them a preferred option for sellers who will often take a lower cash offer.
Those buyers in a position to take the longer view should put Stamp Duty charges and shorter-term market volatility in context. For all the uncertainty about the next year or so, property analysts expect 15-20% of capital appreciation over the next five years, with Chesterton forecasting almost 40% growth.
There is evidence that, at the top end of the market, buyers are taking such a long-term perspective, and are continuing to invest in London. According to recent figures from estate agency Savills, more than £1.43 billion was spent on prime London properties worth over £20 million in the 11 months to the end of November – that’s more than a third greater than the figure for the whole of 2015.
“Part of that increase can be explained by the drop in sterling after last June’s Brexit vote,” says Brick Black Managing Partner Camilla Dell. “But it represents a clear vote of confidence in London by the global ultra-high-net-worth community. Despite uncertainty around leaving the EU, the UK remains an attractive destination for the global elite, and very much open for business.”
The rupees are starting to flow
Indeed, over recent months, we have seen increased interest from one particular jurisdiction. Since the beginning of 2017, 30% of our new buyer enquires have come from Resident Indians. We believe this uptick is being driven by relaxations in the rules governing how much money Indian nationals can send abroad for overseas investments, including property.
From 2015, the annual limit per person was raised to $250,000 – meaning that a husband and wife can remit $500,000 each year, and a family of four $1 million. Indian nationals who have been taking advantage of this so-called Liberalised Remittances Scheme are now at the point where they have accumulated sufficient funds offshore to begin investing in London’s property market.
Enquiries so far reflect the limited amount of time that has elapsed since the limit was raised, with Indian buyers tending to look for property around the £1 million mark, either as a pied a terre, or as a buy-to-let investment to provide portfolio diversification. We expect this trend to continue, given the historic links between the UK and India and, especially, with Indian entrepreneurs seeing opportunities in the UK post Brexit.
It’s hard to believe that this year marks the 10th anniversary of the launch of Black Brick. It’s been an amazing journey and quite a learning curve – setting up the business just before the Global Financial Crisis of 2008-09, and weathering all manner of market ups and downs, changes of government, and paradigm-shifting referendum results since then.
Over the last decade, we have closed more than a £1 billion worth of transactions for our buyers. What we have found, time and time again, is that demand for London property is a constant. Whether it’s to diversify a portfolio, to take a view on capital appreciation, find the perfect pied a terre, or put down roots, the attraction of London outweighs short-term uncertainty and seemingly constantly changes to property taxation!
It’s given us enormous pleasure and satisfaction to help so many of our clients find their perfect property. We’ve worked hard over the years to provide a service that is personal, bespoke and which goes the extra mile. The number of our clients that come back to us again and again is testament to the hard work we put in.
We want to give a big thank-you to all of those clients, and to our introducers and partners, without whom the success of Black Brick would not be possible. We look forward to working for you, and with you, over the decade to come.
Our latest addition to the team
We are delighted to welcome the newest member of the Black Brick team – Lauren Porter, who joins as Executive Assistant to Camilla Dell. Prior to joining Black Brick this month, Lauren provided support to nine team members at Skillcapital, a private equity advisory company. Previously, she assisted the Heads of PR and Events at Rolex Watch Company.
Outside of work, Lauren enjoys socialising with friends, cooking, travel and challenging activities. In September 2015, she climbed Kilimanjaro to raise money for Children With Cancer UK.
Acquisition of the month – Englemere, Kings Ride, Ascot SL5
Our Saudi client had recently retired, and was looking for a property for family holidays in the UK, close to London but with a view to making his budget go further than is possible in the capital. They also required a balcony, porter and car parking, preferably within striking distance of Heathrow.
We spent time educating our client and his family about possibilities in the Home Counties, and found a spacious two-bed apartment within a luxury new development near Ascot. Unlike similar developments across Surrey and Berkshire, Englemere is set within 12 acres of stunning mature landscaped gardens, and also benefits from a swimming pool, tennis courts and summer house for residents’ private events. We also managed to negotiate £150,000 from the asking price, delivering a competitive £711/square foot.
Rental acquisition of the month – Bryanston Square, W1
Given the impact of higher Stamp Duty on the cost of buying property, our rental search service has become increasingly popular over the last year. Our Russian client was looking for a three- or four-bedroom apartment to rent in Marylebone. He wanted the property to be in a good location, have high ceilings and be able to house all of his existing furniture.
We found the perfect property on our first tour with the client, within two weeks of being instructed. Despite two other offers on the property, we were able to secure the property for our client for less than the asking price.
We are delighted to report that over the last 12 months our dedicated Managed Sale Service has successfully sold in excess of £50 million worth of property across a wide range of values and locations in London. In many cases, we were able to sell off-market, through our extensive network of fellow buying agents and other contacts within the residential property world – an ideal solution for clients where confidentiality and discretion are key.
Our latest sale was a first floor apartment in Cadogan Gardens, Chelsea SW3, which we sourced for our client for £2.5 million in July 2012. We identified a buyer through our network prepared to offer £3.525 million, or £2,880 per square foot. This represents a 41% increase in value over four years, and the highest price achieved in this building – an incredible result given current market conditions.
If you are considering selling your property during 2017 we would be delighted to arrange a no obligation meeting to discuss how Black Brick can work with you to ensure a successful sale.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.
