If there was any message from June’s General Election, it is that there are no safe bets in politics any more. No one predicted that the Conservatives would see their Parliamentary majority disappear; almost no one was expecting anything but disaster for the opposition Labour Party.
The result – a hung Parliament, with the Conservatives remaining as the largest party – offers little in the way of clarity. While Prime Minister Theresa May has been able to secure the support of Northern Ireland’s Democratic Unionist Party, her party’s grip on power is shaky. Many commentators expect her to be replaced as prime minister; some are predicting another General Election sooner rather than later.
Where does all this leave the London property market? As we discussed last month, housing did not feature prominently as an election issue. In that sense, the paralysis of a hung parliament will have little effect (although a couple of minor reforms are moving forward – see below). However, the prospects of another election, with the possibility of a revived Labour Party coming to power with plans to heavily tax more expensive properties, will likely chill activity.
One interpretation of the election was that it represented a vote against a ‘Hard’ Brexit. London’s financial sector would clearly benefit from the continued access to EU markets promised by a softer Brexit: that would be a medium-term positive for the property market.
But the only certainty is, unfortunately, more uncertainty. This is likely to crimp activity in the prime market, with a couple of caveats. First, the drop in sterling since last year’s Brexit vote is making London property more attractive for dollar and euro buyers. That, allied with the city’s perennial cultural, political and economic attractions mean that international buyers remain active.
Second, life goes on. “While some discretionary buyers might be pausing, people still need to trade up, downsize or relocate,” says Black Brick Managing Partner Camilla Dell. “Needs-based buyers and sellers are driving activity in the market, and that will continue, whatever the political weather.”
A growing proportion of that activity is taking place off-market. A recent report from estate agency Hamptons chimes with our experience. It found that one in four sales of properties in London worth more than £1 million changed hands behind closed doors this year – up from 14% in 2014. This June, more than a third of the transactions we closed for clients were off market, compared to under a quarter in the same month in 2016.
Sellers at the top of the market have long taken such a discreet approach, for reasons of privacy and security. However, it is being adopted more widely. In a slow market, many sellers are reluctant to put a public price tag on their home, and risk having to cut that price, again publicly, if the property doesn’t sell.
“It’s understandable why sellers might want to go off market, to avoid ‘tainting’ their property with a price reduction,” says Caspar Harvard-Walls, Black Brick Partner. “We’re seeing it more and more in our managed sales service.” However, this approach does make life more complicated for buyers, he adds. “As well as registering with estate agents, and keeping an eye on the online portals, buyers have to try and break into the off-market network. For the average buyer, it’s extremely time consuming.”
It’s exactly in this scenario, however, that a buying agent like Black Brick can really prove its worth. We are extremely well connected, and at the top of selling agents’ call lists. We can secure off-market viewings that individuals would be unable to obtain. Furthermore, we can also offer a candid assessment of whether the price demanded is in line with the market – and we can provide an insight into the best negotiating strategy to adopt.
Another trend we’ve commented on before is the growing number of clients who are instructing us to carry out rental searches. In the first quarter of this year, 30% of our searches were for rental properties – compared with just 8% in the same period last year.
The main reason is the increased transaction costs involved in buying property in London. Increases in Stamp Duty, in particular, have added tens of thousands of pounds to the cost of moving house – meaning that buyers tend to want to take their time before making a purchase. Prime Central London rentals are particularly popular with overseas buyers, who wish to spend time getting to know London before committing to a purchase.
Renting may be less of a financial commitment than buying, but it comes with its own challenges. Rental properties tend to move very quickly, meaning that prospective tenants without representation on the ground can struggle to secure the best properties.
It can also be difficult to assess whether a tenancy offers good value. Parts of London’s rental market can get overheated, and landlords can often secure rents that are out of line with market values by taking advantage of tenants’ inexperience.
There is an additional complication in that, unlike with property purchases, solicitors are not involved. Nonetheless, tenancy agreements can be complex and can run to dozens of pages. Tenants need to be cognisant of agreements that, for example, may not allow them to break the tenancy after six months.
The rental search service we offer helps our clients avoid these problems. We have considerable experience in pricing rental properties, and we have access to pricing databases, meaning that we are typically able to secure discounts to the rent demanded. We review contracts to ensure they are fair to tenants. And we can also tap into our off-market knowledge: owners who are considering selling a property are often open to short-term tenancies.
Two rule changes have recently come into effect that, while unlikely to have major implications for our clients, are worth noting.
The first is a proposal to ban estate agents from charging fees for services such as drawing up tenancy agreements. Typically, agents charge prospective tenants an average of £223 per tenancy. A new Tenants’ Fees Bill was announced in the Queen’s Speech to Parliament on 21 June, to be published later this year.
For our clients, estate agents fees are not typically a substantial outlay in the context of the rent paid, and their disappearance is likely to be absorbed by agents.
The second change is a tightening of the money laundering rules that apply to estate agents, including buying agents such as Black Brick. From June 26, under the Money Laundering Regulations 2017, agents are now required to carry out due diligence on buyers as well as on the sellers that they are representing.
To the extent that the tightening of regulations helps to protect the London property market from money laundering activity, it is to be welcomed. At Black Brick, we already carry out rigorous due diligence as part of our client on-boarding process. The reputable agents with whom we do business tend to have similarly rigorous processes in place; for that reason, we don’t anticipate that the new requirements will cause delays in transactions.
Our clients were retiring into London from Surrey – a growing trend among older buyers looking to take advantage of the capital’s cultural attractions and convenience. They were seeking a house with a garden close to a high street, or a lateral apartment with a large terrace overlooking the Thames.
After an exhaustive nine-month search, we finally secured a unique 2,268 sq. foot freehold property on Reckitt Road, in the heart of the popular Glebe Estate and a few minutes’ walk from Chiswick High Road. The house has the added benefit of a stunning roof terrace with roof top views over the Glebe Estate.
In addition, we also managed to secure the property for £1.53 million, saving our clients £65,000 from the asking price. They paid a very competitive £674 per square foot, compared with the £780 per sq. foot at which the house next door was sold 12 months ago.
As we have noted above, our rental acquisition service is proving extremely popular, as clients take their time before committing to a purchase, as was the case with our client who was relocating from Jordan to London with his family. They wanted to be within 30 minutes of the children’s school in Surrey, and no more than an hour commute to the City. They also had a limited time window both for the search and viewings.
We reviewed more than 25 properties on their behalf across Wimbledon, Roehampton, Putney and Coombe, identifying an immaculate five-bedroom new-build house, with a generous 3,642 square foot, in sought-after Wimbledon village. We also negotiated the rental down from £2,800 to £2,250 per week.
Rental acquisition of the month 2 – Queens Gate Place, Kensington SW7
Our clients were looking to upsize to a larger period four-bedroom apartment in South Kensington – which, given the local housing stock, are a challenge to find in the area.
Nonetheless, we put in the legwork with our contacts and, in just three weeks we identified a suitable apartment, measuring some 2,000 square feet – the only period property on the market at their price level. In addition, we were able to negotiate the rent down from £2,100 to £1,800 per week, saving our clients £1,300 per month.