November 2014

More supply and political uncertainty create best buying conditions seen in prime Central London since the financial crisis

In the past few weeks social unrest in Hong Kong, the spread of the Ebola virus, a slump in the oil price, concerns about the European economy, and equity and bond market volatility not seen since the financial crisis have all provided timely reminders of the relative long-term attractions of bricks and mortar.

But with more stock coming to market there is no question that conditions within prime Central London (PCL) property have cooled since earlier in the year. Seasonality, a stronger pound and some inevitable disquiet ahead of next year’s general election have all played their part too.

Much of the new supply appears to be coming from owners sitting on large capital gains now seeking to exploit the valuation gap between the capital and the commutable Home Counties. According to one leading London specialist agent, there are now 12 prospective buyers for every available property for sale in London, down from as high as 24 at the start of the year. Another estate agent focused on London estimates that supply has increased by 13% over the past three months. Against this backdrop, vendors are being forced into a more pragmatic approach to price if they really want to sell their property. For buyers, these are attractive market characteristics.

Camilla Dell, Black Brick Managing Partner comments; “Our view is that the next six months present perfect buying conditions, the likes of which we have not seen since the financial crisis- for buyers that are willing to take the plunge, they could be rewarded handsomely as all of the longer term forecasts over the next 5 years are for 20 to 25% growth across central London.

“The current market is full of sellers who six months ago, turned down offers at 10 to 15% below their asking price and now bitterly regret that decision as they are facing the prospect of having to lower their asking price and accept even lower offers in order to achieve a sale. Christmas and the end of the year is also a psychological deadline for many vendors who want to have achieved a sale by the end of the year and are therefore willing to accept much lower offers.

“Buyers can use the slower market and a general feeling of caution to their advantage by driving a harder bargain – we recently witnessed a flat in Mayfair that originally came onto the market 12 months ago at £10.5 million that has just gone under offer at £6.75 million. We love nervous markets as it gives us the ability to negotiate more strongly on our clients behalf.

“If buyers sit and wait until after May 2015, they may be disappointed. If the Conservatives win, we believe the market will very quickly return to normal, with no threat of a mansion tax, so the opportunity will have been lost.”

Wider UK housing market slowing too but outlook remains positive

For once, market conditions in London and in the wider UK appear to be broadly in tune. The latest figures from the Land Registry showed house prices in England and Wales slipping 0.2% in September for a 7.2% annual gain. London house prices rose 18.4% in the year to end-September despite a 0.7% fall in September itself.

Meanwhile, the monthly survey from the Royal Institute of Chartered Surveyors (RICS) showed prospective new buyer demand slipping in the capital and elsewhere. The headline price net balance for the whole of the UK fell from 39 previously to 30 in September. Though indicative of a solid market, +30 is the lowest reading on the RICS measure since June 2013. Expectations for price growth over the coming twelve months remain positive, with prices expected to rise across all regions of the UK, according to the RICS survey.

Black Brick key metrics still vibrant – demand robust for competitively priced properties

At Black Brick our own key metrics remain both resilient and vibrant. New client sign-up, the strongest lead indicator to future sales, has been strong in recent weeks. We wrote last month about the success of our recent trips to the Middle East and Cyprus. Since then we have travelled to a number of key Asian cities where interest in PCL property also remains robust. New clients include both overseas investors and owner occupiers with budgets from sub £1m to over £30m, all keen to exploit any short-term weakness in PCL prices.

We also wrote in our October update about our views on the Mansion Tax. In the face of widespread criticism from both within Westminster and from the corporate world, the proposals from the Labour Party and from the Liberal Democrats have already been watered down. We will, of course, monitor closely any further developments ahead of next year’s general election. However, it’s worth noting that we have not yet had a single client pull out of a deal or defer their search due to concerns about a Mansion Tax.

Indeed, for high quality properties priced competitively demand remains strong. We have been recently scouting properties for a new overseas client and identified an attractive first floor apartment with high ceilings in Durham House, a sought-after residential building just a short walk from the Kings Road in Chelsea.  New to the market, the ink had barely dried on the marketing materials when we were told the £6.5m apartment had been sold to a cash buyer putting down a non-refundable deposit.

We believe that the long-term fundamentals for PCL property remain strong, backed by wealth creation overseas and by London’s significance in a number of key global industries. In the past month, London has been voted once again as the most desirable city to work worldwide. The report from Boston Consulting group and totaljobs.com surveyed more than 200,000 people from 188 countries. The results shows that more people wanted to work in London than any other city worldwide.

Mike Booker, international director at totaljobs.com, said: “This report cements London’s reputation as a truly global city. Not only does it offer a wealth of job opportunities in a range of industries, but it boasts some of the world’s top cultural attractions, so it’s no surprise that people across the globe want to come and work here.”

Property Acquisition of the month: Proving our mettle in Bethnal Green

Our clients were a young couple living in Islington looking for a local investment property around the £500,000 mark. We identified the Mettle & Poise development on Hackney Road in Bethnal Green as offering good value and strong long-term potential. The former Queen Elizabeth children’s hospital dates back to the early 1800s and has undergone a stunning transformation in what is fast becoming one of London’s most sought-after enclaves. Due to the strength of our relationship with the selling agent we were able to hand pick the best unit at an attractive price. Other recent sales within the development demonstrate that our client’s buy-to-let has already increased in value and based on the success of this first property we have subsequently been instructed to find them a second buy-to-let. Please click here to see the case study on our website.

Other recently completed transactions include a £1.1m apartment for an English client. On the edge of the City, close to the new Crossrail station at Farringdon and also within walking distance of Liverpool Street and Shoreditch Stations, the apartment therefore offers excellent transport links to both the City and the West End. The flat is part of a new mixed use development in another vibrant London area enjoying strong interest from both investors and owner-occupiers.  Once again our early interest in the development and strong relationship with the selling agent allowed us to secure the flat at an attractive price for our client.