October 2018

A market on the turn

Hindsight is a wonderful thing. It’s only possible to spot the bottom of a market after the fact, and there’s no shortage of those who’ve got it wrong. However… We’ve been arguing for some months that much of the risk in Prime Central London property has been priced into the market: that uncertainty around Brexit is likely overstated, and that pent-up demand, when it is finally released, will trigger a scramble for attractive properties.

“The evidence is growing that we may be right, and the market has not only bottomed out, but is showing signs of accelerating,” says Camilla Dell, Black Brick Managing Partner. “In August and September, we saw double the number of incoming enquiries compared with the same period in 2017.”

Many of these are UK based – fully one-third in recent months, compared with none in the same period last year. UK-based buyers have the luxury of ignoring the twists and turns of the Brexit negotiators – for most of them, their future is in the UK regardless. But clearly they are coming to the view that the market is at, or near, the bottom.

In addition, North American buyers are showing greater interest in the UK. Thirty percent of enquiries were from US and Canadian prospective purchasers, compared with one in five in 2017. Those with interests in the tech sector, in particular, see opportunity in the UK. We have also seen strong interest from the Middle East in recent months.

There are a number of reasons for these buyers to believe now is the time to act. The first, as mentioned, is the view that Brexit is likely to be resolved soon. JP Morgan recently put the odds of a deal at 60%, a second referendum at 20%, and the chances of no deal similarly pegged at 20%.

More important is the UK’s relative value. Taken from the peak of the London housing market, in late 2014, sterling has fallen 19.25%. Combine that with a drop in property prices of 15-20%, and dollar buyers today are able to make acquisitions for almost 40% less than four years ago. “Add to this the recent rally in the oil price, which has almost trebled from its low in early 2016, and there are good reasons why buyers are starting to return to Prime Central London,” adds Dell.

…but overseas buyers face Stamp Duty risk

However, we can rely on politicians to do their level best to rain on the parade. Prime Minister Theresa May has announced that non-residents and overseas companies will face an additional Stamp Duty charge, with the proceeds used to help the homeless.

Recent hikes in Stamp Duty have already hit the Prime Central London market hard, and this additional levy won’t help. The devil is, of course, in the detail; the government is consulting on its plans, and there is as yet no clarity on how large the tax will be, nor on when it would come into effect.

Such charges are becoming increasingly common. Vancouver introduced a similar tax in 2016, and New Zealand has banned foreigners from buying houses altogether. Singapore charges a 20% tax on foreigners buying property, while Hong Kong levies a 15% tax.

It could be worse: rather a one-off purchase tax than annual mansion taxes, as some jurisdictions are considering. In addition, the evidence from the increases in Stamp Duty in the UK is that any rise will, over time, filter through to lower prices, especially among developments marketed to international buyers. Ultimately, it is likely to weigh heavier on the seller than the buyer.

A Budget giveaway for buy-to-let landlords?

But it’s not all bad news from the government. Chancellor Philip Hammond is rumoured to be considering a proposal, from right-wing think-tank Onward, to waive capital gains tax on rental properties sold to long-term tenants.

Currently, landlords are subject to a 28% tax on any rental property they sell. Onwards has proposed splitting the windfall between the landlord and the tenant, which it calculates that, for the average rental property in London would be in the region of £39,000. It suggests that the estimated £1.3 billion cost of the policy could be recouped by limiting other tax-breaks enjoyed by buy-to-let investors.

“This policy would make a lot of sense,” says Dell. “Reductions in tax breaks for landlords are already making a lot of buy-to-let properties unattractive investments, but landlords can’t sell without taking a big capital gains hit. This would give landlords a way out, while helping tenants onto the property ladder.”

Dell to speak at prestigious property event

Managing Partner Camilla Dell has been invited to speak at the annual Economic Research Council property debate on the evening of 23^rd October. This prestigious event, the sixth discussion on the future of housing and house prices, will focus on the consumer market: what is the outlook for house prices? Which areas are booming? Will first-time buyers be able to get on to the property ladder?

Dell will be joined by Marcus Dixon, Head of Research at property data firm LonRes, and Chris Baldwin, a Partner in Deloitte’s corporate finance real estate division, with other speakers to be announced. Tickets, at £25 plus booking fee, are available here.

Acquisition of the month

This month’s flagship transaction for Black Brick is an unusual one, in that – for reasons that will become obvious – we cannot disclose many of the details. It was, however, truly a unique purchase – a £20 million-plus mansion in Notting Hill.

While we pride ourselves on acting quickly, this search took the best part of a year. Our client was looking for a property on just a handful of roads, backing on to communal gardens, and at a price point that doesn’t come on to the market very often. Indeed, the house we secured was marketed extremely discreetly, and only came to our attention as a result of our unrivalled network.

Our work does not end with the signing of contracts. The property is in need of renovation and updating, and we will be supporting our client with the necessary works. We are delighted to have found them a one-in-a-million property, and look forward to helping them transform it into their dream home. 

Rental acquisitions of the month

Our rental search service is becoming increasingly popular as high transaction costs make clients more prepared to take their time before committing to a purchase. This month, we have completed three noteworthy rental searches.

The first was for a client relocating from Canada who had been looking to buy. However, frustrated with what they had seen, they instead turned to us for a short-term rental, with a view to us taking over the purchase search. 

The brief was for a large, modern, two-bed in great condition, in a portered block with a lift, private gym and private gardens in southwest London. We also needed to ensure that their furniture, which they are shipping from Canada, could fit in the apartment.

We found a large apartment on the 4th floor of Neo Bankside, one of the best new developments south of the river. As well as meeting all their requirements, we were able to shave 6.4% off the asking rent, securing it for £4,460/month – comfortably within their £5,200 budget.

The second search was for a student from India, who was looking for an immaculate one-bed apartment, close to where she was to attend college. The challenge was we had only seven days to research, preview properties, organise tours and negotiate the rental.

Fortunately, our team works well under pressure, and we were able to secure a large, one-bedroom apartment in Newcastle House, a well-known mansion block between Baker Street Station and Marylebone High Street. It had been on the market for less than an hour before we had organised a viewing. Relying on our experience and advice, our client had the confidence to negotiate decisively and secured the apartment below the asking price in record time.

Finally, we were also able to help another student, this time from Canada, find a one-bedroom in a secure apartment block close to her university at Regents University College. Through our long-standing relationship with the estate agent managing the post-renovation marketing of the Sherwood, the Crown Estate’s newest development, we were able to gain access to a perfect off-market apartment in the development.

On the market

In addition to the services we offer property buyers, we also offer a managed sale service, and we have recently been appointed to sell 18 Wycombe Square on behalf of an Isle of Man Trust Company. The asset must be sold and the client is highly motivated.

Wycombe Square is a gated, award-winning development, constructed in 2004 by St George. Located in the highly prestigious Holland Park area of West London, the scheme takes the form of a tree-lined London square, comprising 19 luxury town houses and an apartment building. 

With a guide price of £8.95 million, equating to a highly competitive £15,08/sq. foot, the freehold five-bedroom, four bathroom house is almost 6,000 sq. feet in size and includes three reception rooms, an office, family room and swimming pool, as well as secure underground parking for up to three cars and a 24-hour concierge.

To arrange a viewing, please contact: chw@black-brick.com or call the office on +44(0) 3141 9861.