Format: Print

Fit for a King

If January has been a dry one for you so far, it’s okay, you’re on the home straight; there’s less than a week, or about half a million seconds, to go.

But it seems we aren’t just fair – (or freezing-) weathered friends of a health fad. Fitness is becoming a major focus for London’s luxury developers. It’s no longer acceptable to plonk the pool and gym in a sweaty basement. Now they dangle trophy pools between towers (see Ballymore’s Embassy Gardens) and dedicate prime upper floor space to treadmills with a panoramic view.

Never ones to shy away from a show-stopping swimming pool, Berkeley have gone to town at the Foster + Partners-designed South Quay Plaza, where apartments cost from £599,950. There’s a 9,000 sq ft health club with “dry” and “wet” sections, so you can cover all your spa and cardio needs before taking a dip while overlooking Canary Wharf through vast double-height windows.

There’s also Berkeley St George’s London Dock near Tower Bridge – prices from £869,950 to £3.5m, which provides a touch of bling while you swim with a gold-tiled wall running along the pool’s edge and a spa reception and treatment rooms to out-do any five-star hotel spa.

London Dock also has one of the city’s only “residents only” squash courts – something that 37 per cent of us say we’d like in a new development, according to a recent survey by CBRE, who are marketing London Dock.  Having a gym is the top demand (76 per cent), a pool is as popular as a private garden (69 per cent) and 46 per cent of us would like a spa.

The amenities that developers choose are also a pretty good pointer of who your neighbours might end up being. Winding down for residents at Queen’s Wharf in Hammersmith – where one-bed flats start at £715,000 – means soaking up serene river views from the rooftop yoga terrace on the roof. But at Keybridge in Vauxhall – where one-beds cost from £675,000 – stress relief will come from the boxing gym in the basement. It’s the difference between those who want to “keep fit and switch off” and those who need to “burn off steam”, says Rosie Nesbitt, sales and marketing director at FABRICA, the co-developer of both projects with Mount Anvil.

Developers are also latching on to the fad for al fresco fitness. Barratt London have what must be the city’s most scenic outdoor badminton court, along with an outdoor gym, table tennis and chess tables, at Fulham Riverside, where one-bed flats cost from £796,995.

And in east London, City Road’s target demographic of young techies and City types has lead Berkeley Homes to provide a boot camp terrace at 250 City Road. “It will appeal to buyers who work long hours and it engages with the growing trend of exercising outdoors – away from crowded parks, pavements and cycle paths – after a day spent confined to a desk,” comments Piers Clanford, MD at Berkeley Homes (North East London).

Down the road at No. 145 is The Atlas Building, where the developers Rocket Investments feel buyers will want a swim with a view, with full-height windows along the length of the pool. Flats cost from £628,000 to £5m for the duplex penthouse. “Having high-quality lifestyle facilities is becoming an important differentiator in the luxury residential market. Buyers are increasingly focused on well-being,” says Andrew Hawkins, Rocket Investments’ director.

Meanwhile, Islington Square – Sager Group’s £400m redevelopment of the old North London Royal Mail centre near Upper Street, with flats costing from £715,000 to £1.79m – has gone for trendy branding by signing up Third Space to take over its fitness club.

It won’t just be typical Third Space trendies who sweat their stuff here, but families too as this will be the gym’s first Family Club, with children’s training space among the facilities on offer, plus some of London’s most designer changing rooms. Third Space’s CEO Colin Waggett describes it as “part of our vision to redefine London’s fitness club landscape”.

Just as high-end apartments are starting to look like the swankiest hotels, so must the facilities, thinks Camilla Dell, managing partner at Black Brick buying agency. “Residents at the Corinthia Residences in Whitehall Place have access to one of the largest spas in Europe, spread over four floors with 17 treatment rooms, a vitality pool, amphitheatre sauna, ice fountain, marble heated loungers and private sleep pods,” Dell comments. You can buy one of those Corinthia apartments, incidentally, for £11.425m through Savills or Knight Frank.

Dell also mentions Television Centre, the new development at White City, which will have a 20,000 sq ft gym for residents and paying members, along with a Soho House hotel and members club with a rooftop pool. “Developments are becoming more like ‘destinations’ for outside visitors as well as property owners,” she says.

For some, though, keeping fit is more of a theoretical pursuit. As Jo Eccles, managing director of Sourcing Property, recalls: “We recently searched for a property for one young client who insisted on having a gym in her building but rejected any property that required climbing stairs”. Bet she’s counting down the minutes until the end of Dry January.

Where to buy in 2016

Two words are destined to sum up the prime London market in 2016: stamp duty. Faced with paying 12 per cent stamp duty to upgrade, owners of £1.5m+ properties are voting to stay put and improve.

Sophie Rogerson, co-founder of the private property office RFR – recently described by Tatler as “London’s hottest property consultants” – puts it in terms that will hit home to the super-rich. She calculates that the £213,750 you’d spend on buying a £6m home (that’s the cost of, say, a new three-bed flat at Chelsea Creek or a five-bed townhouse in Connaught Square) is the equivalent of 15 years of family holidays or the price of educating a child privately and through university.

David Adams, managing director of John Taylor estate agency, is seeing wealthy Londoners buy up French pads rather than upgrade in the capital. “The taxes here now make France look competitive. The threat of mansion tax killed interest among French buyers in London, but the tap has been turned on again for British buyers on the Cote d’Azur and ski resorts such as Megève and Courchevel,” he comments. For London’s prime market next year, he thinks: “The very top end will hold, but I expect a price correction of 15 per cent for the £3m-£20m market and the £2m-£3m will stagnate.”

That’s not all on the stamp duty front. In April, the three per cent stamp duty hike on buy-to-let properties and second homes comes into play. Until then, we could see a surge in investment. After that, well, “without appearing overly gloomy, it could be another nail in the coffin,” comments Andrew Langton, chairman at Aylesford International. “The residential market has taken too much of a bruising during this Tory government with SDLT, ATED tax [on company-owned UK property] and the latest penalties on buy-to-let tax relief. We’re also being warned of a possible rise in interest rates in 2016 that could trigger massive price reductions.”

New developments with prized, one-off, often waterfront location – such as One Tower Bridge in 2015 – won’t struggle to sell. Chelsea Waterfront, where two-bed flats start at £1.55m through Savills and Knight Frank, is selling fast without offering any discounts or incentives. Other developments to look out in 2016, thinks Camilla Dell of Black Brick buying agency, are Chelsea Barracks, 20 Grosvenor Square and, outside of traditional prime central London, the huge Television Centre development in White City.

“We may also see some ‘fire’ sales at developments such as Battersea Power Station,” says Dell. “Much of Battersea was sold off-plan in Asia to buyers who have been hit hard by weakness in their local currencies, making London unaffordable.”

Meanwhile, Mayfair – thinks Simon Barnes of H Barnes & Co – will be the focus of all attention in prime central London in the coming year. “With Brockton Capitals’ plans for the extensive redevelopment of Curzon Street, Finchatton’s plans for Grosvenor Square and British Land’s newly launched Clarges development – which is already achieving premium prices – this postcode will be the magnet for super prime property,” he comments. “Planning has also just been granted for John Caudwell’s scheme in Audley Square, which looks set to become a landmark address in London.”

And with London’s top tier new developments already offering every concierge service and five-star hotel-style facility on tap, where will developers go next in trying to lure wealthy buyers? “Tech spec” are the buzzwords according to Andrew Hawkins, director at Rocket Investments, which is building Shoreditch’s 40-storey Atlas Building. “High-speed broadband is a must in new luxury developments and more online concierge systems will be introduced to complement the personal services,” he thinks.

John Morley, founder of Johns&Co, which specialises in marketing new London developments, predicts our attention will be focused on making our wheels feel more at home. “Developments where you can drive your car into an elevator and park next to your apartment is definitely a trend to watch out for among luxury buyers,” he says.

Luxury overseas

High-end Spain – Mallorca, Ibiza, Barcelona and Marbella – will be prominent in 2016. They are still buyers’ markets, but genuine luxury new developments in prime locations are scarce and buyers are ready and waiting. “I think 2016 is going to be Barcelona’s year. For the first time since the city became a ‘must go’ destination, there is going to be a wide range of good quality residential new development coming on the market,” comments Alexander Vaughan, founder ofLucas Fox estate agency.

The PGA Catalunya Resort, north of Barcelona, also reports rising interest among British investors who would otherwise have bought a London buy to let property but have been deterred by the rise in stamp duty rates.  Athena Advisors predict a similar trend among British investors in Paris, Madrid and Lisbon, where prime property is a third of the price of its London or Paris equivalents and where luxury brands are moving in.

Further afield it’s all about safety. Barbados scores highly on that count, says Jeannie Mahon from Knight Frank Barbados, and the island is seeing growing demand in the $10m market (Mahon has just sold the waterfront Four Winds villa for $35m) and also for $1.5m+ lock up and leave properties on resorts such as Royal Westmoreland.

Mauritius also gets the safety vote. “It’s widely seen as the safest African nation and it’s fast becoming a financial hub that’s a popular destination to invest in for holidays, lifestyle or retirement, with attractive yields and tax benefits,” comments Robert Green, managing director of Sphere Estates, which is marketing plantation-style villas at Villas Valriche from $659,000.

For 2016’s investment hotspots that combine lifestyle appeal, Knight Frank’s Edward de Mallet Morgan suggest St Barts and Ibiza. Sydney is also likely to be a “strong performer”, says Knight Frank’s Kate Everett-Allen, and Paris is a “good hedge” and possibly “the alternative investment destination of choice,” comments Alasdair Pritchard, also from Knight Frank.

So, if you’re among London’s prime buyers and considering your options in 2016, where will your spare cash go? On buying taxes, a basement extension or a bolthole overseas? Check in same time, same place next year to see which way the pendulum swung.

 

Keep it neutral even if you are not selling

cd times

Climbing the property ladder and moving into ever-bigger homes was once the path for those with a growing family, but now homeowners have a new mantra — renovate, don’t relocate.

Some simply can’t reach the next rung thanks to relentless house price rises, but for many it’s an active choice, and the case for staying put became even more compelling last year when stamp duty was reformed. This made anyone spending more than £938,000 on a home worse off, and left those buying a £2 million house facing a tax bill of £153,750. That buys a lot of home improvement, so it’s little wonder that the top of the market has cooled.

Someone who has chosen to invest in their existing house rather than give the taxman an early Christmas gift is Camilla Dell, of Black Brick Property Solutions, a London buying agent. Dell, who has been finding homes for well-heeled buyers since 2002, might have exploited her insider knowledge to find a bigger home, but instead she opted to stay put. Dell recently completed a renovation and found that it was a better option than buying another property, especially given the changes to the tax regime.

“When you take into account the costs of moving and the stamp duty, I paid less on the refurbishment than I would have done on the tax bill,” she says. “Also, I love where I live and I love the house. I wouldn’t have wanted to move even if money weren’t an issue.”

When Dell bought the Victorian terraced house in West Hampstead 12 years ago the property was divided into two parts. There was a lower ground two-bedroom flat, which was tenanted, and she lived in the upper section of the house. “I set my business up in the loft and then made the lower floors an office as it became more succesful and the tenants moved out,” she says. “That involved knocking down some walls and making it open plan. When the business expanded I rented an office in Mayfair and we converted the house back into one unit and added an extension. The lower ground floor became a dining room and kitchen leading into a sitting room with bifold doors out to the garden. One big family living space. It completely transformed the house and moving the kitchen meant we gained a formal reception room. I had my first daughter and we were very happy, but a year ago we decided to refurbish the house because it was looking very tired — and I had another baby on the way.” Dell hired an architecture company, dMFK, and the builders set to work.

The plan involved replacing the floors, staircase and bannisters, repainting the house, renovating the master bedroom and its bathroom, and replacing the sash windows to put in double glazing. Two bedrooms with lots of storage were created upstairs for the children, a new office was added, and their live-in nanny’s bedroom was moved so that she had her own space and bathroom.

Even though she knew that she wasn’t planning on moving, Dell couldn’t help thinking like a buying agent and remained conscious of future saleability. “Even if you’re not planning to sell immediately you’ve always got in the back of your mind not to do anything too garish. It’s best to keep things neutral — my clients are put off by bold colour schemes. I’ve seen deals fall through because of poor decor choices.”

She couldn’t resist some personal flourishes though. “My daughter loves dinosaurs so we put in silver and white dinosaur print wallpaper, and another with butterflies in the baby’s room,” she says. “It’s very cute.”

Dell rented a temporary home in her dream area and lived there while the house was renovated. “We took a flat in St John’s Wood,” she says. “I’ve always wanted to live there so I thought I’d rent and see what life was like. It was OK, but it was noisy. After six months we were dying to get back.” Having moved out in October last year they thought the work would take three or four months, but this turned into six. “We should perhaps have been better organised and started the work a bit earlier, but we’re very happy now. It’s a great home. Staying put was the right thing to do.”

No second chances?

It is undoubtedly a First World problem, up there with agonising over whether to plump for Waitrose or Marks & Spencer smoked salmon this Christmas, to go tall or grande with your decaf soy latte with caramel drizzle, or to tip the builders who have been using a portable loo in your front garden for six months while you are mid-extension. But there is a new property quandary, following last month’s revamp to stamp duty. Do you rush to buy that dream holiday cottage or pension-boosting buy-to-let before the tax rises on April 1, or wait to see if prices drop next spring in response to George Osborne’s latest property manoeuvre?

The announcement last month of an additional 3% rate on the purchase of any second home costing more than £40,000 is a measure designed to keep property values in check and make the market more accessible to first-time buyers. The 2011 census revealed that 1.57m people in England and Wales had an additional property that they used for 30 days or more each year. Yet, as with many government policies, there may be unintended consequences.

Estate agents and other property professionals are split in their predictions about how the housing market will respond. In one corner sit those who believe a stampede is on the way. “The changes could create a surge in demand, as landlords look to beat the implementation date,” says Rory O’Neill, head of residential at Carter Jonas estate agency. Camilla Dell, managing partner at the London buying agency Black Brick, agrees: “We’ve taken several new inquiries from buyers who want to crack on.”

Adrian Gill, director of the Reeds Rains and Your Move agencies, talks about “a scramble for second-home purchases” leading to higher prices during winter, when values typically take a dip. Savills estate agency’s head of residential research, Lucian Cook, also anticipates a rush to complete deals by the end of March — perhaps pushing prices up in the short term. From April, he says, demand for holiday homes may dip, “with a consequential impact on pricing”.

Yet is at this point, after the new tax comes into effect, that many agents and analysts suggest canny buyers should pounce. Anyone purchasing now will probably pay over the odds, they argue, even when you take the lower stamp duty into account. “This will adversely affect the holiday-home market in the short term, with demand falling after April next year, resulting in a downward pressure on prices,” says Miles Kevin, director of Chartsedge, a Devon estate agency specialising in second homes.

For those who do wait, one thing looks certain — it will be difficult to beat the 3% surcharge. Although buy-to-let purchasers can offset it against capital gains tax when they eventually sell, they must pay upfront. Owners letting out holiday homes may still enjoy some of the mortgage-interest tax breaks recently removed from buy-to-let landlords, but they will have to pay the extra 3% if their second home is in England, Wales and Northern Ireland.

Otherwise, it appears that the well-publicised trio of houseboats, caravans and Scottish homes — the last of which are subject to Scotland’s Land and Buildings Transaction Tax, with a £300,000 cottage, for example, attracting a £4,600 tax bill — are the only sales to be exempt from the new duty surcharge.

Buy-to-let has boomed in the past year, in part because those aged over 60 have been able to access their pension pots and release cash, much of which has been invested in property. One of the biggest specialist mortgage firms, Paragon Group, last month reported a 102% increase in the volume of lending, up from £656.6m in 2013-14 to £1.33bn in the year to September 2015.

How will the higher stamp duty affect this? The impact will be felt in different ways across the country. The biggest ripples will be in areas where there are substantial buy-to-let sectors, which have been highlighted by research compiled for The Sunday Times by Countrywide, Britain’s largest estate and letting agency.

“The new rates of duty will effectively increase the price investors pay, and hence reduce the yield they achieve,” says Fionnuala Earley, Countrywide’s chief economist. “New landlords must do their sums more carefully to make sure returns on their investment add up.”

In the year to October, Countrywide’s offices in the West Midlands sold 16.7% of their homes to buy-to-letters, the largest proportion of any region in England. Yet some individual hotspots, all outside that region — Guildford, in Surrey, for example, and Doncaster, in South Yorkshire — saw much larger shares of their sale stock snapped up by investors. These are the type of places that are likely to see their markets affected more significantly if the hike in stamp duty deters buyers.

In Leeds, for example, no fewer than 41% of Countrywide’s sales in the year to October were to BTL landlords. In Southampton, the proportion was 38% and in Harrow, northwest London, 35%. Plymouth and Calderdale, in the foothills of the Pennines, were close behind on 34%. “While the region with the highest proportion of investors is the West Midlands, the highest concentrations of investors are spread more widely across the country,” Earley says.

The same principle applies to local housing markets where a high proportion of buyers are looking for second homes, either as pieds-à-terre or holiday properties. Figures from the review website TripAdvisor show that the greatest demand for rentals of holiday homes — a good indication of where they exist in large numbers — is, after London, in Cornwall, Yorkshire, Devon, Wales, Dorset and the Cotswolds.

There’s every sign that in many of these areas, the rush of buyers keen to avoid Osborne’s new levy has started. In north Cornwall, where almost half of the properties in some villages are holiday homes, the telephones started ringing as soon as the chancellor stepped down from the dispatch box.

“Sellers planning to launch in the spring were saying, ‘Get it on the market now’,” reports Jo Ashby, a partner at John Bray and Partners, a local estate agency. “The more serious buyers are aiming to exchange over the winter. This injection of energy — albeit a bit of frenzy — has changed the market, at least until April.”

According to Ashby, good-quality houses that had come off the market for the winter are going back on sale now ahead of Christmas. Yet she sounds a note of caution: while Rock, Port Isaac, Newquay and other long-standing locations will probably bounce back quickly, it may not be the same everywhere. “This is going to make a bigger dent on those less-well-known or emerging holiday-market areas.”

So, the choice is yours. You can sit tight, enjoy the mince pies and gamble on prices falling in April. Or you can take the plunge and buy now — though working to such a short deadline is not for the faint-hearted, and means Christmas may be even more fraught than usual. It takes an average of 12 working weeks to buy a property. In the 17 weeksbefore April 1, we have both Christmas and Easter, when pivotal figures in the buying process — agents, surveyors and lawyers — shut up shop for several days.

“Waste no time in speaking to your solicitor and financial adviser — don’t wait until you’ve found a suitable property,” says James Greenwood, director of Stacks Property Search & Acquisition, a nationwide buying agency. “If you get a mortgage offer, make sure you know its limitations. It may exclude properties that are listed, have some commercial aspect or are leasehold.”

He also recommends avoiding any property being sold by a vendor who may change their mind. “Careful questioning will give you an idea of the motives for selling,” he says.

Harpal Singh, managing director of the comparison website Broker Conveyancing, predicts “serious resource issues” for lawyers handling sales. “It seems almost certain that buy-to-let conveyancing fees will rise to cope with the workload,” he warns.

There is one further complication. A government-led consultation process is considering what stamp duty should be paid by people who temporarily own two homes — for example, “accidental landlords” who are stuck between sales, or those who inherit a house — and whether loopholes might exist if, for instance, you split ownership between spouses. We may have to wait until spring for these answers, too.

 

How to invest in commercial property

When times get tough, commercial property provides the perfect backdrop. Abandoned office blocks, half-finished developments surrounded by barbed wire and cranes standing idly on the skyline: in an economic downturn, real estate is one of the first sectors to suffer.

With this in mind, most investors approach commercial property with caution. Memories of the crash of 2008-09, in which many office developments ground to a halt, are still strong. So for those investors keen not to get caught out again, what are the best ways to tap into the opportunities in the sector without taking on too many of its risks?

The market

Commercial property encompasses retail, industrial estates and office blocks. “[It] can refer to anything from the acquisition of a local Domino’s franchise to negotiating with the Barclay brothers to acquire their prized Ritz hotel on London’s Piccadilly,” says Edward Minter, a development consultant at Black Brick, an independent property buying agency.

And while the majority of investors are unlikely to be taking tea at the Ritz — let alone buying the hotel — Mr Minter’s point is a good one. Properties — or lots, as they are known — bought in the commercial sector tend to be much larger than purchases in the residential market. Norway’s sovereign wealth fund, for example, recently snapped up a 150-year lease on 25 per cent of Regent Street, one of London’s main shopping centres.

“It is likely that you will need to spend around £10m-plus to get good quality assets,” Mr Minter says.

Money is flowing into the sector. Investors pumped more than £60bn into the commercial property markets in 2014, figures from Legal & General Property reveal, up from £52bn the previous year — and almost twice as much as was raised in 2012. According to LGP, at £47bn, investments so far this year are set to surpass last year’s performance.

“We are on track to have another really strong year in the commercial property market,” says Chris Ireland, UK chairman of property agents JLL.

How to enter the market

With the barrier to entry set so high — unsolicited bids received for the Ritz in 2012 valued the property at £625m — the most well-trodden route to commercial property is through one of the range of funds available or by investing in a listed real estate investment trust or Reit.

Investors buy shares in a Reit, which delivers any additional rental income to shareholders within a tax-efficient structure.

The range on offer also reflects that of the property market as a whole. British Land and Land Securities are more exposed to London offices, Hammerson and InTu are huge retail landlords while Segro is a specialist industrial property play.

Investing alongside others in a listed fund immediately cuts any liquidity issues — whether you will actually be able to sell the building itself — as you are buying units, rather than the asset itself.

For wealthier investors, various syndicates — usually groups of up to 20 people — offer the chance to invest more directly. However, in this instance, you are buying the building itself, and if you want to sell up, you will need to find someone else (usually another syndicate member) to buy your share. Often the investment is geared, that money is borrowed against it to enhance returns, but with opportunity for greater rewards comes bigger risk.

Ireland’s property sector collapsed because speculators had borrowed money from domestic banks. And when the credit crunch came in 2008-09, investors were hit not only by falling property prices but also by failing banks.

More suited to experienced investors, these syndicates typically start with a lower investment limit of between £50,000-£100,000.

Exchange traded funds, which mimic the actions of an index or market, are another way to invest. “Investing through ETFs allows investors to gain exposure to the characteristics of physical real estate while preserving the liquidity and ease of access of a Reit,” explains Manuela Sperandeo, head of iShares Emea specialist sales at BlackRock.

“ETFs, with their ability to be bought and sold in small denominations throughout the day on exchange, give instant access to an asset class that is otherwise considered to be illiquid and with high barriers to entry.”

What am I getting exactly?

First, and probably more important than the returns on offer, is the diversification factor. Property offers a means of making money beyond equities and bonds.

In terms of returns, there are three main drivers: income from the rent that is paid; income growth as the rents increase; and capital value or the actual worth of the building itself, which will hopefully grow over time.

Levels of income vary by sector. Rental growth in central London, for example, has been running at an annualised 5.4 per cent over the past five years, according to LGP. This was 9 per cent over the past three years, indicating the recent strength of the market.

Retail is struggling, hit by a double whammy of the recent economic slowdown and the more structural problem of how to respond to the rise of online shopping.

Is it all about investing in London properties?

Not any more. The London market is still booming, but undergoing what the fund managers call “yield compression”. Put more simply, there is less value in central London properties: they are too expensive and while rental growth is still strong, it is growing at a faster rate in the second-tier cities of Manchester, Birmingham and Leeds.

“There is very little supply of new office space for tenants to take,” explains Robert Stassen, Europe director of capital markets research at JLL. “That does mean that over the last six to 12 months, you have seen real rental growth not only in London.”

One factor is that the credit crunch prompted building work in the UK to come to a halt, leaving a two-three-year gap in the supply of new office blocks and, later, rocketing rents and property prices. “Mayfair is now the most expensive place on earth to have an office,” says Eugene O’Sullivan, managing director of Morgan Pryce, the office search company.

What are the risks?

Property is a notoriously cyclical investment. Prices, not just in such sought-after locations, have gone through the roof. “It feels like we’re at the frothy top of the market,” says Mr O’Sullivan.

The end of quantitative easing and the potential for a rise in interest rates are both likely to hit the commercial market. Many consultants said their clients were sitting on cash at the moment, wary of investing in London in particular.

After “a good run” over the past three years, it is hard to find value, says Tim Sankey, manager of the £3.6bn Aberdeen Property fund. His fund is taking demographics as its cue, looking more carefully at student accommodation, elderly care homes, hospitals and the residential market. “We’re having to go around the fringes to find value,” he says.

Mr Sankey is not alone. David Skinner, global head of strategy and portfolio management at Aviva Investors, also warns about central London’s reliance on overseas’ investors. “We have seen lots of investment from China, Malaysia, South Korea and Japan,” he says. And while this remains strong, any weakening in the global economy could see the market quickly collapse.

Do the benefits outweigh the risks?

Ultimately, property — and particularly commercial real estate — should be seen as a diversification play. As such, advisers warn that investing in a Reit, as it is an investment trust, will leave you exposed to the equity markets.

Yet yields in London, in particular, have been compressed and the gap in the supply pipeline of new developments caused by the industry shutdown in 2008-09 has largely been filled. The capital has become too expensive, but opportunities abound in the second-tier cities in the regions. And despite many sounding a note of caution, there are others who remain optimistic.

“We don’t think we’re near the end of the cycle,” says JLL’s Mr Ireland. “This cycle has got further to run.”

What’s Next for London’s Luxury Real-Estate Market

After four years of stellar growth, the real-estate bubble in prime central London hasn’t exactly popped. But the market seems to be going pfffftttttttt. And the outlook for 2016 isn’t promising.

By the end of the year, prices in prime London are expected to have fallen 2%, according to research from Savills estate agents. Hardest hit are homes priced above £5 million, or just over $7.6 million. Here, demand fell by almost 60% in the third quarter of this year compared with the previous quarter, according to LonRes, a property-market analyst.

Partly to blame are increases in stamp duty—a tax paid at closing by home buyers—implemented last year. Under the new system, buyers purchasing homes valued above £937,000, or about $1.4 million, will pay more in taxes. In prime central London, where the average sale price is $3.5 million, according to Cluttons estate agents, a buyer would owe the government about $288,000 in stamp duty, up from $244,000 before the increases were implemented.

Some argue that London’s top-end market was faltering even before the stamp-duty bombshell. It was “looking very over-valued,” said Lucian Cook, director of residential research at Savills. The company forecast that 2016 will be a year of zero growth in prime central London, followed by 2% growth in 2017, and a moderate 5% increase in 2018.

Not everybody sees falling prices in London’s most expensive homes as a bad thing. Buying agent Camilla Dell, managing partner of Black Brick, hopes that lower prices will reboot sales, “which have really suffered in 2015,” she said. “As we saw when prices came down 30% during the financial crisis in 2008/2009, opportunistic buyers start to pile in.”

Still, the area could see a glut of unsold homes priced at £5 million or more. “Stock is building up as we speak, and there is a conspicuous oversupply of properties for sale—some of which are thoroughly over-priced,” said Trevor Abrahamsohn, owner of Glentree International estate agents.

Developers, meanwhile, are responding to demand for less-expensive homes with lower stamp duties. The apartments are smaller, but the buildings include plenty of communal facilities. “Resident lounges, entertainment spaces, spacious gyms and spas, cinema rooms and games facilities, additional storage facilities, wine rooms, private garages and additional gardens are all almost commonplace in new developments,” said Michelle van Vuuren, managing director of residential development at UK Sotheby’s International Realty.

Buyers are also starting to look beyond prime central London for value for money. Kings Cross—a one-time red-light district in north London—shows the greatest potential, saidMartin Bikhit, managing director of Kay & Co. The area, in the midst of a sweeping revitalization effort, has excellent transportation links and an attractive mix of homes, shops, restaurants and offices, including Google’s U.K. headquarters. “The likes of Google is going to bring a great deal of wealth and footfall,” he said.

Next year, demand will come from a new wave of international buyers, agents predict.

“At the sub-£5 million level, expect Chinese buyers to flock to London due to recently reduced constraints on gaining U.K. visas for purchasing properties,” said Giles Hannah,senior vice president of Christie’s International Real Estate.

Others see newly minted billionaires from India buying prime London property. And the strengthened dollar gives buyers from the U.S. more spending power.

Additionally, Iranians looking to move assets out of the Middle East are showing increased interest in prime central London, said Faisal Durrani, head of research at Cluttons.

Runaway Roundabout

A mob of 200 torch-carrying protesters halted traffic on London’s Old Street roundabout last month in a demonstration against the gentrification of nearby Hoxton and Shoreditch.

Their targets weren’t on City Road itself, which feeds into the roundabout, but they could well have been, since the area is undergoing some of the most concentrated regeneration efforts in the capital. Six major new-build developments in the area have been finished or are under construction, and more than 2,300 apartments are due to be completed by 2018. This new residential district is on the doorstep of London’s hub for digital businesses, dubbed “Tech City” by the government in 2010.

But are these homes too expensive? Some apartments cost more than £1,300 per sq ft and the market for high-end properties in London is faltering — house price growth in prime central London has practically stagnated since stamp duty reforms came into force in December last year, according to Knight Frank, the property consultancy.

“On the face of it, development of this magnitude in a small geographical area would suggest oversupply,” says Rachel Webster, partner at buying agents Property Vision, “but there is a real demand for this type of property.”

That demand is being converted into sales. The Eagle, a 26-storey development designed by Farrells, sold all its 206 units off-plan, while Canaletto, a 31-storey tower near the City Road basin, has sold 90 per cent of its units off-plan. With more than 900 units, the largest of the new developments, 250 City Road, a mixed-use scheme by Berkeley Homes, has sold more than 200 units off-plan.

“The studios and one-bedroom units priced around the £1m mark in these developments are selling really quickly,” says Camilla Dell, managing partner of buying agents Black Brick. “Buy-to-let purchasers are confident they’ll rent easily with all the investment that’s gone into the area.”

Lee Layton, a research analyst at Carter Jonas, the estate agency, calculates the gross rental yield for one- or two-bedroom flats in and around Old Street as 5.1 per cent.

At the top end, all of the developments have more exclusive apartments. At the Lexicon, a two-bedroom apartment on the 28th floor is available for £1.4m through the developer Mount Anvil. A three-bedroom penthouse on the 40th floor of 250 City Road is available for £3.6m, through Berkeley.

So why Old Street? Until recently the area was known mostly for its traffic-blackened roundabout. “Old Street has soul,” says Layton, who thinks the creative industries and start-ups in the area — or rather, their employees — gave Tech City its on-trend status. But its future is a contentious issue. “It’s naive to think it couldn’t lose that [status] if the area prices out the very people that make it popular,” he says.

Entrepreneur Duncan Cheatle suspects being priced out is not merely a risk but a reality, with start-up businesses already having to move elsewhere. “[Tech City] is a victim of its own success,” he says. “Office rents are just outrageous.” Since the second quarter of 2014, rents on the fringes of the City have risen 18 per cent, according to Carter Jonas. Docklands, Stratford and the areas around Whitechapel are the only remaining sub-markets that offer refurbished office space at rents of less than £40 per sq ft — one reason why many early-stage businesses have already moved to those areas.

Developers have been trying to combat this. White Collar Factory, under construction by the Old Street roundabout, calls itself a “new urban campus” for London that will provide more than 39,000 sq ft of flexible office space. The Eagle also features a start-up hub, offering shared workspace, with 150 desks at less than £10 a day.

The developer of The Atlas Building, a 302-unit tower, set to be the area’s tallest, has also demonstrated some sensitivity to the area’s character. Rocket Investments has bought the boarded-up Three Crowns pub and merged the building with its own premises, while restoring the pub to its former green-tiled glory. Yet looking ahead, will this merging of old and new be quite as neat?

“The individual towers might be beautiful, but how do they relate to each other and the character of the street?” says John Phillipps, a Carter Jonas consultant, who argues that in areas like this, a common vision is sometimes lacking, as is a sense of community. “A traditional Paris street, a boulevard, would have hundreds of doorways. Therefore, you build a community, because people talk,” he says. “Six tower blocks don’t make a boulevard.”

Still, with smart apartments selling readily to owner-occupiers and investors alike, it might take more than a few anarchists to make a dent in City Road’s glass-plated armour just yet.

Ten things you need to know about £1million homes

A million pounds may not seem to go very far in the property market these days, but if you look in the right places you can make it stretch to a lovely family home- particularly if you are happy to leave the capital in your wake.

1.) There is intense competition for homes priced between £1 million and £2 million in London, according to Camilla Dell, the managing partner of the Black Brick buying agency. She says: “The market is busy with domestic owner-occupiers who have been frustrated at the difficulty in finding, and successfully bidding on, family homes in the capital. Additionally, the uncertainty in global stock markets is encouraging investors to move assets into London property. We are also representing cash buyers and those aiming to ‘future buy’ property for their children.”

2.) Robin Chatwin, of Savills, says that the farther you move from London, the more you can get for £1 million. However, this does not mean that buyers become less fussy when offered a spacious property outside London. Quite the reverse. It seems that people are more likely to shrug their shoulders when told what a property in the capital will cost. Chatwin comments: “The closer you are to London, the more vibrant the market becomes at this level as buyers largely accept the premiums you pay to be in close proximity to the capital.”

3.) The key reason for the demand for homes priced below £2 million is stamp duty. A £1 million home now attracts a stamp duty bill of £43,750. The bill for a £2 million home is £153,750; the reason for the increase is the 12 per cent rate payable on the portion of the value between £1.5 million and £2 million. A rate of 10 per cent applies to the portion between £925,000 and £1.5 million.

4.) There are more than over 4,000 properties on the market around the £1 million mark, according to Rightmove. During the past five years there has been an 80 per cent rise in homes available at this price. In the past 12 months, growth has been recorded at 18 per cent. The largest number of £1 million properties are in London, unsurprisingly.

5.) With ultra-low interest rates, £1 million mortgages have become cheaper for high earners, who still need to meet strict affordability criteria. Wealthier borrowers might also be more likely to get an interest-only mortgage approved. It can help those with, say, hefty school fees to pay which means they need to manage cash flow in the short term, but longer term will have more disposable income with which to clear the mortgage.

6.) Aaron Strutt at Trinity Financial, a mortgage broker, says: “It wasn’t that long ago the high-street lenders pretty much stopped offering £1 million-plus mortgages and if you wanted a larger loan you needed to speak to one of the private banks. But times have changed and the high street lenders are actively competing with the private banks to target wealthier borrowers like bankers, footballers and entrepreneurs. They are tempting them in with some incredibly cheap rates, low arrangement fees and the promise of faster mortgage offers.”

7.) Strutt says that more high street lenders are setting up departments to manage larger mortgage applications and they are giving their underwriters more flexibility to get the deals through. “Lenders are also pushing to supply £1 million-plus mortgages because they think it is easier to provide one larger loan rather than four or five smaller ones,” he says. “The compliance is roughly the same, there is less risk and the lenders spend less time processing applications.” Banks including Barclays, NatWest, Santander, Metro Bank, Coutts and Halifax offer £1 million-plus mortgages.

8.) Brokers report that Barclays has got some of the most competitive rates in the market and its cheapest deals are often available up to £3 million, while NatWest has a specialist large-loan team. However, Virgin Money has a fairly strict policy of lending up to £1 million. If you are looking for a £1 million-plus mortgage, there are cheap loans available. HSBC has a 2.19 per cent five-year fixed rate for mortgages up to £3 million. There is also a three-year tracker rate at 1.65 per cent from Woolwich, but there is a £1,999 arrangement fee and borrowers will need a 35 per cent deposit to qualify. As the mortgage doesn’t have early repayment charges, borrowers can switch to a fixed deal when the base rate finally increases.

9.) The process for taking out a large mortgage is similar to that for a smaller mortgage, with the lender having to assess overall affordability. However, for £1 million-plus mortgages this process can sometimes take longer. Adrian Anderson, director of mortgage broker Anderson Harris, says: “Some of the very high earners may have very high outgoings. For example, higher earners with families may have large private school fees, nannies and housekeepers, as well as extravagant annual family holidays to Saint Tropez in the summer and Verbier in the winter. These all have to be factored into affordability.”

10.) Yet in some scenarios the affordability of a £1 million mortgage can be more straightforward. Harris adds: “One of my City clients borrowed in excess of £1 million. His income multiple was circa two times the mortgage and he worked 12 hours a day, so had no time to spend any of his vast income.” Harris highlights that many people applying for £1 million-plus mortgages have the ability to purchase the property outright but are choosing to borrow to take advantage of low interest rates. He says: “Why use your own money when you can use someone else’s — and at such cheap rates?”

No kerb appeal? So much the better

Estate agents will often wax lyrical about the so-called kerb appeal of a property. They might effusively flag up the elegant steps leading to a generously proportioned portico. Or the buffed front door flanked by symmetrical bay trees. The first impressions of guests or passers-by really are the barometer of the level of style or opulence within. Or are they?

What if a property looks pretty uninviting at the first glance but hides a surprisingly awe-inspiring or capacious interior, a bit like the Tardis in Dr Who or the magical doorway of Alice in Wonderland? Some artistic-minded owners revel in misleading first-time visitors by presenting a home that is not quite what it seems. No, a bland exterior or unobtrusive entrance is not always bad news for owners and agents, especially if the property is well located, and there may be benefits that are not obvious at first glance.

In fact, some buyers prefer an anonymous, unprepossessing entrance, suggests Michelle van Vuuren, of the UK’s arm of Sotheby’s International Realty. “There’s been a real step change away from overt symbols of wealth — like One Hyde Park — to very discreet and private homes,” she says. “It’s not a case of purposeful neglect of kerb appeal but a deliberate choice of nondescript doorways in the style that private members clubs such as Soho House and Blacks Club in Dean Street. The new 300 Vauxhall Bridge Road development has plain black doors with no names — ideal for those individuals who prefer to keep their assets well hidden.”

Another example is a three-bedroom penthouse in a rather utilitarian-style but sought-after block of apartments in St John’s Wood, north London. Accessed by a simple black door, the property is priced at £2.865 million through Hunters Estate Agents.

Van Vuuren adds that privacy is one of the biggest demands of wealthy buyers in crowded cities, and sometimes the conversion of non-residential buildings offers the best chances of neither seeing nor hearing your neighbours. A good example of this is a former tram shed in Camden, north London, behind whose ugly industrial metal façade hides a beautifully styled 5,000 sq ft open-plan loft conversion with four bedrooms, for sale for £4.85 million through Sotheby’s.

Camilla Dell, of Black Brick buying agents, also sells to high net worth individuals who prefer to stay under the radar. “I recently found a £12.5 million house in Chelsea for an Egyptian buyer who loved the fact that a tiny grey door opens into 8,000 sq ft of high-spec living space. Nobody passing would know the house exists which is perfect,” she says.

Of course, an unassuming home is also good for security reasons — they don’t attract the interest of opportunist burglars and they conceal what is hidden within.

That said, it might have been difficult to sell that Chelsea home to Italian buyers, however much they love the area. “They tend to be very conscious about what the property looks like from the outside, much more than what it looks like inside,” says Jo Eccles, of the buying agency Sourcing Property. “An unattractive property can certainly put off certain nationalities and minimise your audience if you are selling.”

Ah, so here comes the rub: how easy (or hard) is it to sell a property lacking kerb appeal?

A property with kerb appeal will always attract viewings, so those that don’t have it can certbe a challenge to market. “I would advise the estate agent not to show any external photos of the property so that you don’t put people off actually getting through the [ugly] front door,” says Eccles.

Charles Curran, of Maskells estate agent in Chelsea, agrees that agents have to work far harder to sell such homes. It took more than 50 viewings to sell an ex-local authority flat that was immaculately finished with a bespoke kitchen, wood floors and high-tech lighting. “Even with a wonderful interior, a series of concerns pass through an applicant’s mind about a poor exterior — how much is this going to cost to renovate, if I can’t renovate what will my friends and family think? Will I be too embarrassed entertain? People fundamentally like to have their decisions reinforced by others,” he says.

However, he adds that kerb appeal is also about the location of a property. “A tired wall surrounding a house on a prime site can be remedied by the buyer. But if there is a train behind the house or troublesome and untidy neighbours, this is not in control of the owner — either way, having realistic price expectations is the key to selling the property.”

James Robinson, of agent Lurot Brand, says that he has achieved impressive prices from buyers of unusual properties, such as converted garages, where other agents have failed — and apart from applying lots of enthusiasm, it’s about flagging up the hidden values. This especially applies to mews properties in sought-after areas of west London that were historically utilitarian service entrances to large properties and where coachmen or ostlers used to doss down. One for sale in Queen’s Gate Mews in South Kensington opens out on to a vast three-bedroom house with double-height ceilings.

“My mother taught me always to look at the ugly homes for five reasons,” says Robinson. “They are invariably better in the flesh than they are in pictures on property portals; if the location is good you can always change the house; no one else goes to see them so there is less competition; you also get better space for your money; and, finally, there is that old truism that states, ‘Always buy the worst home in the best location you can afford’.”

Pretend you’re a millionaire: Britain’s luxury homes from £1m to £100m

Listen carefully this month and you’ll hear the distinctive rattle of keys or the clipped sound of well-buffed shoes and stylish stilettos on the pavement as London’s high-end estate agents hit the streets after the summer lull.

Many wealthy vendors take their homes off the market in June, July and August before recommencing the hard sell in the autumn. The pause in proceedings means they can relaunch in a push to snare a buyer at the highest possible price before demand falls away again in mid-November.

To add to the flurry, September is the month that many owners test the market for their luxury homes for the first time.

But is there such a thing as value for money at this level, and who will snap up these multimillion-pound homes? Here’s our guide to buying in the luxury London market and what you can get both in and outside the capital, should your Lotto numbers come up.

The £1 million mark

What does a million get you in London these days?

This tends to be the price territory for affluent young families with two properties to sell – and even then it doesn’t go that far. In fact, the once-princely sum is now the average house price in 4,735 streets in the capital, according to the website Zoopla.

Stick to central London and £1 million will buy you an off-plan one-bedroom flat in the Nova complex in Victoria – near Buckingham Palace, but at 652 sq ft hardly palatial itself – or a one-bedroom flat in Sloane Gardens, Chelsea.

“Alternatively, it’ll fund you a short lease flat – something with just a few years left but that will cost another couple of million to extend,” says Jake Russell, co-director of Russell Simpson estate agents. Or it might see the beginnings of a two-bedroom flat in the less swish bits of Chelsea or South Kensington.

Head into the nappy valleys of zones two to four – the likes of Blackheath or Muswell Hill – and £1 million buys a three/four-bedroom Victorian terrace house with a small garden. In Wandsworth these days it gets you a two-bedroom riverside flat, which means couples with a toddler and a bump are heading into the hinterlands of Tooting, Teddington and Forest Hill.

And a surprising number of young buyers have a million to spend, with many financed by the “Bank of Mum and Dad”. “Some are couples selling two single properties to buy one bigger home and others are young tech whizzes who have made a fortune designing apps,” says Jo-Anne Neighbour from Savills Islington.

Meanwhile, go north and your pot of gold goes much further. In Dore, a village on the edge of the Peak District, south-west of Sheffield, Fine & Country are offering Monnybrook House, with six bedrooms and a swimming pool, for £1.15 million. Travel into Scotland and you can bag yourself an historic estate: Lowood House, just three miles to the east of Edinburgh, is on the market with Strutt & Parker for £1.06 million. The property comes with extensive grounds and several outbuildings.

Up to £3 million

This is the price bracket for family homes near Battersea Park and other desirably leafy London enclaves.

“Buyers at this level are looking for a ‘forever home’ with an easy commute to the City, space for a growing family and good schools,”

says Robin Chatwin, head of Savills in South West London

Think bi-folding doors and fancy basements. Marsh & Parsons have a five-bedder that fits the bill in Barnes Village for £2 million.

If you can stretch your budget to £3 million, you’ll move into large five/six-bedroom houses in the best bits of Wimbledon or Richmond or a four-bedroom period flat in South Kensington’s sought-after Cranley Gardens, through Marsh & Parsons.

Venture out into rural England and up to £3 million will bag a country pile, such as Peplow Hall, a Grade II listed 18th-century home in Shropshire: 11,600 sq ft, plus a coach house apartment and 65 acres of gardens with a swimming pool, tennis court and lake. Yours for £2.45 million through Savills.

Up to £5 million

“If you are shopping around £5m rich under-40s in the finance, property, oil and gas and tech sector”, says Charlie Bubear from Savills.

In Chelsea, there’s another group shopping for £5 million homes – newly-weds given extravagant houses as a wedding present from their parents.

“They want ‘turnkey’ properties with gadgets such as Lutron lighting, integrated sound systems and wine fridges,” says Bubear.

Ideal for them is the London Factory, a hi‑tech four-bedroom, 5,000 sq ft house in a converted factory in Bermondsey, on sale for £3.5 million through Savills and Sotheby’s.

Head to Notting Hill, Marylebone or Little Venice and you’ll be competing with American and European house-hunters wanting “3,500 sq ft and upwards”, says Jo Eccles, the director of the search company Sourcing Property. Qatari buyers are also prominent in this market, according to Rokstone Estates. “They want 24-hour porters and properties that are ready to move straight into,” says Rokstone’s director, Becky Fatemi.

For “growing London families looking to get more house and land for their buck”, Octagon has designed Burford Place in Picketts Hill, in Hampshire – an hour from Waterloo. The seven‑bedroom mansion of 7,700 sq ft is set in 5.5 acres and on sale for £4.75 million.

Up to £10 million

Welcome to the world of celebrity. Jamie Oliver has just splashed out on a Grade II listed 17th-century, eight‑bedroom house in Hampstead as a family home (as well as the £7 million one he owns down the road in Primrose Hill). Kate Moss and George Michael are just across the heath in Highgate.

There are 13 streets in London where £10 million is the average house price, a market that was, until recently, dominated by international buyers. But falling oil prices have knocked wealthy African buyers out of the market, according to Camilla Dell from the buying agency Black Brick, and the Chancellor’s overhaul of the stamp duty system has also deterred others.

On your viewing list for around £10 million would be a raft of elegant Knightsbridge town houses and newbuild designer penthouses in areas of London that would never have conceived of such budgets a decade ago.

You could buy the vast duplex three-bedroom penthouse at The Heron in the City, a three-bedroom flat at The Beecham in Covent Garden, or a six-bedroom detached house in St John’s Wood.

Head north and £10 million will buy you 2,200 acres of Northumberland countryside with a 12-bedroom house from GSC Grays or an 11‑bedroom mansion with 12 acres in Alderley Edge, Cheshire, through Jackson-Stops.

Up to £20 million

So, if £10 million buys you a huge house with bells and whistles in a prime location, what does £20 million get you? It’s simple, really: “More space and an even better location,” says Rokstone’s Becky Fatemi.

It’s the difference between Elystan Place – a five-bedroom 3,300 sq ft house “in the heart of Chelsea” and Chesham Place, a five‑bedroom 5,000 sq ft town house “in the heart of Belgravia”.

Westminster has joined the super‑luxury gang with four properties costing more than £20 million hitting the market simultaneously – a first for this central but undervalued area. Two of the properties are neighbours. Numbers 26 and 28 Old Queen Street are adjoining Grade II listed black brick Georgian town houses that have been given dramatic makeovers inside. Each covers more than 7,000 sq ft, on sale for £23 million through Hathaways.

This old establishment street in the heart of British politics attracts British wealth, but the historic area is starting to pique international interest.

Outside London, Kingstone Lisle Park, a 13-bedroom Georgian farmhouse with 257 acres in Oxfordshire, is on sale for £20 million through Knight Frank.

Up to £50 million

By the time you’re in the £50 million league, forget about looking in estate agents’ windows.

Only about 10 per cent of properties at this price level will be openly marketed, says Jonathan Hewlett, head of Savills London. This year, six of the big central London luxury house sales at £40 million or above have been to Qatari buyers – including a nine‑bedroom mansion on Mayfair’s Charles Street, with a private pool and cinema complex.

Currently on sale in Avenue Road, St John’s Wood, is a seven-bedroom, 11,000 sq ft “ambassadorial residence”, with indoor pool, leisure area and cinema, for £40 million (through Beauchamp Estates). But Kensington Palace Gardens is the country’s most expensive street – the average house price is £42.6  million, according to Zoopla.

Up to £100 million

There’s only one property in London that’s being advertised at anywhere near this price – a five-bedroom apartment in One Hyde Park offered for £75  million through Savills.

For that you get 9,000 sq ft of opulence in two wings linked by a 160ft hallway, a 24-hour service provided by the Mandarin Oriental hotel and views over Hyde Park.

Offer the guide price and they’ll even cover your stamp duty – which at nearly £12 million would be enough to buy you a six-bedroom Kensington town house.

“Clients with budgets of £100 million or more won’t touch anything that’s on-market. They don’t just want the ultimate in luxury, they want the ultimate in discretion,” says Nick Dawson of Garrington buying agents.

But don’t get carried away with the idea that it’s “money is no object”, even for those with the deepest pockets. “Most buyers with this kind of wealth are making hard-headed investment decisions about buying now while prices at the loftiest end of the market are slipping,” adds Dawson.

Made in Mayfair

Sultan Al-Nuami, from Abu Dhabi, has just got the keys to his three-bedroom penthouse apartment on Albermarle Street. There’s nothing unusual about a wealthy individual, originating from the Middle East, moving into Mayfair – whose 5,000 or so residents are drawn from 42 nationalities.

What sets him apart from the traditional Mayfair resident is his age. The Sultan, a student at Brunel University, is 20 years old. He is renting a flat above commercial premises for about £1,400 per week – or £220,000 for the full three-year term – just off Piccadilly. “I chose Mayfair because it’s very convenient and the shops and restaurants are a stone’s throw away,” says Sultan Al-Nuami. “The Mayfair vibe is so alive and it’s close to every location in London.”

He’s not alone in his newfound love for the maze of historic streets and grand squares between Park Lane, Piccadilly, Oxford Street and Regent Street. But although Mayfair is famous for occupying the most expensive spot on the Monopoly board, in recent years it has struggled to justify its lofty status.

Mayfair was born in the 1700s, when the politician and property developer Sir Richard Grosvenor was granted permission to build on Grosvenor Square. Construction started in 1721, as other families began to develop neighbouring areas such as Brook Street, Clarges Street and Hanover Street.

What was a downtrodden district suddenly became highly desirable, with dukes, earls and viscounts all moving to Grosvenor Square – turning it into the most fashionable address in London.

But the playground of Georgian and Victorian nobility began to lose its sparkle after the First World War, as the wealthy residents – many bankrupted by the war – moved out and commercial concerns began to move in. During the Second World War, more businesses fled from the City – and the bombs of the Luftwaffe – to the West End and by 1945 three quarters of the housing stock had been turned into offices.

“Traditionally it is an office-dominated area with a stale corporate environment,” says Camilla Dell, the founder of the property company Black Brick. “Next to Oxford Street and with good transport links, it was deemed a nice place to work but not a nice place to live.”

But that seems to be changing. According to a new report from the estate agent Wetherell, the area is again becoming a magnet for the young, fashionable and wealthy from all over the world.

The report shows that 60 per cent of the 5,100 people who live in the area permanently are from overseas. Of these, 64 per cent are aged between 20 and 44, with the majority living in lavish, serviced apartment blocks.

And, says Peter Wetherell, who has been selling properties in the area for 35 years, Mayfair is definitely getting younger. The proportion of residents aged between 25 and 44 had risen from 33 per cent in 2011 to 42 per cent in 2014. And the number of people renting is another indication of a younger crowd. Almost half the properties are privately let, compared with 26 per cent that are privately owned.

This split also reflects the nature of Mayfair’s housing stock. Most people live in purpose-built apartment blocks or former offices that have been converted into luxury flats – perfect for young couples or singletons.

“The housing stock is more suited for younger buyers,” says Camilla Dell. “Family buyers start their search in Mayfair – drawn to the illustrious address – but even the big houses in the neighbourhood do not have outside space. They just won’t get the big gardens available in Notting Hill, St John’s Wood or Hampstead Heath – which is inevitably where they end up.”

In fact, Mayfair is becoming a borough of extremes with either young, wealthy residents making homes there or older couples whose children have grown-up, downsizing to be near the West End, theatres and shops.

This is exactly the experience of the duo behind the Hanover Properties, an estate agent run by Richard Douglas and Alex Bourne, two former Foxtons employees.

“In the last week alone, we’ve had two buyers in their 20s, each looking to move into properties in the region of £10 million-£20 million in Mayfair for the same reason – the nightlife,” says Mr Douglas.

Their neighbours would now include celebrities such as the actresses Lindsay Lohan and Kiera Knightley and reality stars Mark-Francis Vandelli and Fredrik Ferrier, from Made in Chelsea, who have made their homes a mile or so to the east. There’s a glut of expensive restaurants and private members clubs, such as Nobu, Roka, Annabel’s, 5 Hertford Street, Loulou’s and The Arts Club. “It’s very different to, say, Knightsbridge, as it’s all so much more compact and accessible,” he adds.

Even the estate agents add a touch of glamour – both Mr Douglas and his business partner used to be television actors.

They had another client who sold his home in Mayfair to get away from the 24-hour party scene. “Having bought a place, he turned it into a great party home, removing a floor and creating a DJ booth. Now, married and with a baby, it’s entirely impractical and he’s in the process of moving,” says Mr Bourne.

Mayfair’s transformation from stuffy business district – where it was rare to see a light in the windows after dark – to the new party capital of the West End has been kick-started by the upward trend in house prices.

According to Alex Michelin, the chief executive of the developer, Finchatton, it was in the Nineties, when the residential properties became more expensive than commercial ones, that people started thinking of Mayfair as a place to live again.

Both Westminster City Council and the Grosvenor Estate, which owns much of the area, have been supportive of disused offices and commercial buildings being returned to residential use, he adds. Evidence of this can be found in the millions spent on the beautification of Mount Street, home to the celebrity hang-out Scott’s of Mayfair, and a parade of designer stores.

Only last, month the Qatari ruling family snapped up a six-storey Victorian town house on Mount Street for £40 million – one of the most expensive home sales in London so far this year – the Stamp Duty alone will cost £4.7  million.

While this sale underlined the dynasty’s desire to create a “Little Doha” in Mayfair, the area’s tradition as a centre for finance is also making it increasingly popular with young hedge fund and private equity executives who want to live near work.

This trend is highlighted in Peter Wetherell’s report, Who Lives in Mayfair, which paints a picture of single private wealth managers who work and play on their doorstep, and creatives and the self-employed who work from home.

Eleven per cent of the residents work remotely, 22 per cent commute on foot, while 46 per cent rent privately and 55 per cent live alone.

Mr Wetherell says: “Middle Eastern princes, bankers, wealth managers, commodity brokers, advertising directors and students from ultra-wealthy families are now typical Mayfair householders… they are bachelors and bachelorettes who want to live in a fun and lively resort-village with easy access to fashionable shopping, restaurants, bars and clubs.”

Despite the princely sum paid by Sultan Al-Nuami, research from the agent Knight Frank shows that this is not – “by some distance” – the highest amount paid by students and young renters in Mayfair.

“We have had several student applicants currently looking for properties up to £2,500 per week,” says Rahim Najak, the head of lettings for Knight Frank. “We also recently rented to an 18-year-old international student for £2,000 per week and have another student tenant who has been in the same property for several years at £3,200 per week,” he adds.

Both the sales and rental markets in Mayfair have boomed since the last housing market crash and property prices are now among the highest in the world, proof of the new surge in demand.

Over the 12 months to the end of March the average value reached £2,300 per square foot, an increase of 7.4 per cent from 2013, the Wetherell report shows.

More than nine out of 10 of all properties sold went for more than £1 million, and 28 per cent commanded a sales price of over £5 million – up 17 per cent rise from the previous year.

Even more telling of the Mayfair renaissance, the average price per square foot over the last 12 months was 39.5 per cent higher than the rest of central London.

The super-luxury condominium Clarges fetched £4,750 per sq ft last year, and it’s not even built yet. Although on the south side of Piccadilly, the development has been branded “Clarges Mayfair” to cash in on the new-found Mayfair cachet.

It all adds to the sense of history repeating itself. And Grosvenor Square, where it all began, is at the centre of it. There are several major developments under way there as Finchatton renovates the American Naval headquarters and the Indian developers Lodha convert the old Canadian Embassy into flats – turning the square once again into a playground for a very different kind of aristocracy from the one that first colonised the area three centuries ago.

 

Out of Africa, into W1

Central London’s residential market has long been the focus of international interest. Headlines have highlighted the significant numbers of Russian, Middle Eastern and Chinese buyers, but a new influx of buyers and investors from Africa is now demanding attention.

Harrods Estates’ prime central London office in Mayfair has reported a 400 per cent increase in sales to African buyers in the year to March 2015, compared with the previous 12 months.

“The majority are looking to spend between £2.5m and £6.5m on a two-or –three bedroom apartment, where they can stay when visiting London on business or for pleasure.” says Shirley Humphrey, director at the agency.

“Absolutely numbers are still relatively small but the growth has been quite spectacular and is continuing, exceeding the growth from any other region in the world. African buyers are mostly working in the oil sector. We recently sold two apartments to two men visiting oil firms in Aberdeen. They enjoyed their stopover in London and decided to buy an apartment each,” she says.

The growth in interest from African buyers is also being seen in the higher reaches of London’s residential market. Diles Hannah, senior vice president in London for Christie’s Real Estate, says he has seen a 12 per cent rise in Africans buying in the £10m-plus category over the past year, mostly in Mayfair, Lancaster Gate, Knightsbridge and the City. The buyers are mainly from Ghana, Nigeria and South Africa and are high net worth business owners in oil, finance, minerals and textiles,” he says.

Beauchamp Estates says that, in the three years to late 2014, African buyers spent more than £600m on property it sold in central London. The majority of these buyers spend £15m to £25m each on a home and are from Nigeria, Ghana, Congo, Gabon, Cameroon and Senegal.

“Nigerians in particular, have been longstanding purchasers, in the 1980s and 1990s, typically in North London- Hampstead, St John’s Wood and Primrose Hill. Now enhanced wealth has enabled them to move into Mayfair, Belgravia and Knightsbridge, joined by purchasers from other West African states,” says Gary Hersham. He adds that Africans are also beginning to have an impact on the prime lettings sector.

“They tend to rent a luxury apartment in Mayfair, Belgravia or Knightsbridge for £2,500 to £5,000 per week or on a short let for £10,000 to £15,000 per week [and] stay in London for anything from six weeks up to three months, “says Hersham of his clients.

The reasons for African interest include the stability of the UK’s economy and political institutions. A 2013 report from property consultancy Savills contrasted London’s residential sector with African markets, which “can be volatile with political unrest of a sometimes extreme nature” and can also suffer from “corruption, lack of regulation and a lack of transparency.

In addition, some African nations have longstanding Commonwealth connections with the UK, while a large number of opinion- formers have personal links. “Many wealthy Nigerians were UK-educated and send children to school here, for example,” says Camilla Dell, of Black Brick, a London buying agency, which- since 2007- has seen 44 per cent of its clients come from Africa.

Of those from Nigeria- by far the largest group- 58 per cent have bought homes to live in and 42 per cent bought property as investments. Dell’s clients have shown a preference for recently modernised properties or new builds similar in design to those in Africa’s more exclusive compound developments. They also demand privacy, with facilities such as a 24hour concierge and extensive security.

Private estates, with large, modern houses and easy access to both central London and Heathrow and Gatwick airports have proven especially popular. “St George’s Hill in Surrey is a hotspot for this type of purchase,” says Alex Newall, of Hanover Private Office, an estate agent catering for buyers at the high-end of the market.

However, there are signs that this enthusiasm for British property has taken a knock in recent months as certain domestic issues have had the effect of reducing some Africans’ purchasing power. Nigeria’s economy, in particular has been hit by a fall in international oil prices from $100 barrel to about $60. In addition, some African countries, notably Ghana and Nigeria, have seen their currency weaken against sterling, making London purchases dearer.

Roarie Scarisbrick, of Property Vision, a buying agency that makes regular trips to Africa to meet clients interested in London’s real estate, admits “it’s gone pretty quiet” recently because of these oil and currency issues. “But the Africans will be back,” he says.

Harrods’ Shirley Humphrey is similarly optimistic. “There’s a lull in the market now, because, like every other nationality, African buyers are waiting to see what happens,” she says. “They are a growing force and when the market returns, so will they.”

Homebuyers get moving as mansion tax fears fade

Estate agents began to exchange on property worth millions of pounds as uncertainty over the election lifted.

Buyers who had held off purchasing homes because of Labour a Liberal Democrat proposals for a mansion tax began calling agents early yesterday to confirm their commitment.

Many international buyers had also been preparing to pull out and leave the country as a result of Ed Milliband’s pledge to end “non-dom” status.

Some had agreed to pay more for their property in the event of a Tory victory and have now abandoned discounts discussed previously because of potential mansion tax bills.

“The black clouds have lifted. I have £50 million worth of business poised to go through in the next couple of days,” said Trevor Abrahamson, head of Glentree International, a high-end London agent. Seven of the non-doms the agency was dealing with had been preparing to leave, Mr Abrahamson said. “They were packing their bags but now they will stay.”

Other agents had similar reports. “One of our agents received a text from a buyer at 7am this morning saying that he wanted to proceed with an offer on a £5 million house,” a spokesman for Hamptons International said.

Contracts for several properties just below or just above the £2million threshold were exchanged by agencies including Black Brick and WA Ellis.

“We’re hoping several exchanges we have been waiting on will go through today,” says Andrew Langton of Aysleford International

Make the most of the buy-to-let loan war

The cost of deals is falling but lenders are the most generous to new landlords with substantial deposits, says Melanie Wright

Falling buy-to-let mortgage rates combined with higher rents mean that if you’re considering becoming a landlord, now could be the time to act.

According to the latest HomeLet Rental Index, released last week, rents rose in 11 out of 12 regions across the UK in the first three months of the year. The average monthly rent in the UK is now £902, or £270 if you exclude the Greater London area, and last month the estate agent Barnard Marcus reported that the average rent in the capital was £1507. While this may be bad news for tenants, it means landlords are benefitting from higher returns.

Martin Totty, chief executive at Barbon  Insurance Group, parent company of HomeLet says: “With average rents for new tenancies across the UK now more than 10 per cent higher than a year ago, what we are seeing is a market that is experiencing sustained demand from increasing numbers of people requiring privately rented properly.”

Research for The Times Money by Moneyfacts.co.uk reveals that the average buy-to-let two year fixed rate is currently 3.36 per cent, compared with 3.94 per cent a year ago. The average buy-to-let five-year fixed rate is 4.26 per cent, down from 4.66 per cent a year ago. Several lenders have reduced their buy-to-let mortgage rates in recent weeks. Natwest for example, has cut some rates by up to 0.55 per cent. It is now offering a two-year fixed deal at 2.25 per cent, although there is a hefty £1,995 arrangement fee. This mortgage is available to first time buyers, second time buyers and those mortgaging with a 40 per cent deposit.

Although low buy-to-let rates might be tempting, the best deals are reserved for those with substantial deposits. For example, Santander offers a two-year fixed buy-to-let rate at 2.35 per cent with a £1,995 fee if you have a 40 per cent deposit, but its two-year rate if you have only a 25 per cent deposit is 2.79 per cent, again with a £1.995 fee.

Simon Tyler, of Tyler Mortgage Management, says: “Lenders can be very fussy about by-to-lets and probably the biggest differentiating factor is the size of deposit you have to put down.”

“If you only have a 20 per cent deposit, hardly anybody will want to lend and the deals that are available are relatively expensive with big fees. For example Aldermore Bank offers an 80 per cent buy-to-let deal with a variable rate of 4.48 per cent and a fee of 3 per cent of the loan amount. So if you are borrowing £20,000, that’s a £6,000 fee.

“Some people may think these sorts of fees are worth paying in order to get on the property ladder but the fact is that it is very difficult to meet other criteria, such as receiving enough rent to cover the mortgage interest by a sufficient margin to qualify, let alone make a profit.”

Another potential pitfall is void periods. While landlords must be prepared for times when their rental property is empty, what kills an investment is lengthy void periods, warns Camilla Dell, managing partner of Black Brick, a property buying agency. “Generally speaking, flats are a better investment because the void periods tend to be smaller. Even if you’ve got a lot of money to invest it’s better to spread it out over lots of units than buy one large one.”

Yields are likely to be greater too. “A really good one or two bed-flat should be getting a yield of at least 3 to 3.5 per cent. With a much larger home that could drop to 2 per cent or under.”

Age matters

Your age is determining whether your application for a buy-to-let mortgage will be accepted. Many lenders impose a maximum age cap of 70 or 75 at the end of the mortgage term although others are less strict.

David Hollingworth of London and Country mortgage brokers, says “For example, Kent Reliance can lend to a maximum age of 85, and lenders such as National Counties Building Society will assess on a case by case basis rather than impose a strict cap.

“The Mortgage Works has changed its approach to a maximum age of 70 at application and a borrower could take out a 35- year mortgage term. This recognises that some investors will be considering buy-to-let as part of their strategy to generate income in retirement, especially given the introduction of more flexible pension rules.”

If you’re a younger borrower, lenders will generally want you to be at least 21 years old and an existing property owner.

Mr Tyler say as: “Lenders are very wary of first-time buyers applying for buy-to-let loans because they are available on an interest-only basis with far fewer affordability checks, but then living in them themselves.”

The rent on the property you plan to buy must cover 125 per cent of the mortgage payment, and many lenders require that you have a minimum annual income. For example, Coventry BS, Santander and Accord require all buy-to-let borrowers have a minimum annual income of £25,000. Mr Hollingworth says “The minimum income requirement can be different depending on whether you’re applying on your own or with someone else. For example, Coventry wants at least £30,000 for joint applicants, although some lenders don’t distinguish between single and joint.”

Location, location, location

Buy-to-let lenders won’t be keen to end on all types of property and in all areas, even if the sums stack up. Mark Harris, the chief executive of SPF Private Clients, a mortgage broker, says “Lenders have restrictions on property types and locations. For example they might only want limited exposure to properties above nightclubs, as smell and noise issues cause concern.”

Mr Tyler says: “It’s all about resaleablity . Sometimes they [lenders] don’t like the centres of provincial towns because they had their fingers burned when the market crashed during the credit crunch. For example, Leicester and Nottingham were particularly hard hit. Many don’t like former local authority properties and won’t lend on flats above the fifth floor of tower blocks.”