A year in numbers
Few would argue that this has been the toughest year in the London property market since the financial crisis of 2008. The swirling – and drearily continuing – uncertainty around Brexit has slowed transactions and, while a revival of activity at the top of the market is hopefully a harbinger of recovery, it remains a case of ‘wait and see’ for many buyers.
As we close the books on each financial year, we take the time to review how our business is evolving, and what that might mean for the year ahead. The headline figures, we’re pleased to say, buck the market: we advised on 43% more transactions in 2018-19 than over 2017-18, despite the general gloom.
“People realise that uncertainty in the market creates opportunity, but it also encourages people to seek advice,” says, Camilla Dell, Black Brick Managing Partner. “Also, the lack of supply of good quality properties places a premium on advisors such as us, who have a good network of contacts and who get to hear about properties early.”
We also covered slightly more ground in the last twelve months, buying properties for clients across 17 London postcodes, compared with 13 in 2017-18.
The geographic mix of clients was relatively stable: there was a slight tick-up in the percentage of UK-based clients, from 26% to 30%, while Middle Eastern clients fell back slightly. The big difference was in interest from the US: from zero in 2017-18, they made up more than one in seven of our clients in 2018-19.
One change we have seen in recent months is a recovery in buy-to-let investment. The number of buy-to-let purchases we advised on doubled between 2017-18 and 2018-19 – albeit from a low base. Over the previous 12 months, investment purchases accounted for just under 10% of our business, compared with 36% during the height of the buy-to-let boom of 2014/2015.
One statistic that might appear to have moved in the wrong direction is the percentage saving we achieved for our clients below the asking price. In 2017-18, the average reduction was 8%; this year, it had slid to 6%. However, we think this is less of a reflection of our negotiating skills, and more about the growing realism among vendors about the level of the market.
There is another data point, however, that we are particularly proud: the source of new enquiries. Last year, more than half of our transactions were on behalf of repeat clients or were the result of client referrals. This is up from around a third in 2017-18.
“This shows that there are buyers out there that have confidence in the inherent value of Prime Central London property,” says Caspar Harvard-Walls, Black Brick Partner. “It is also extremely gratifying and a great vote of confidence when clients come back.”
“Clients also value our experience and track record,” adds Dell. “We’ve been in business for more than 10 years now, and the stability and consistency that we offer is really appreciated by our clients.”
Buying up the block
One of those opportunities that is attracting growing interest is in purchases of multiple freehold properties within a single block or, potentially, buying the entire block. We are currently representing several clients who are looking for such opportunities, and we have had additional enquiries.
These searches and enquiries are in the context of weak sterling and soft pricing, and rely on a positive medium-to long-term view of the attractiveness of investment London property. These potential buyers are looking at the current Brexit uncertainty as a buying opportunity, and see considerable upside based on London’s fundamentals.
There is also a considerable tax advantage. A purchase of six or more properties qualifies as a commercial investment, and therefore incurs Stamp Duty at a flat rate of 5%. An equivalent investment – say of £6 million – spread across six £1 million properties would incur an effective rate of 7.38%, while this would rise to 9.25% if a buyer purchased four £1.5 million properties.
In addition, as with most transactions, sellers are usually happy to offer a discount for buying in bulk, especially if a developer is looking to sell the remaining properties in a larger development, or if the buyer is looking to purchase an entire block.
Finally, buying the whole block gives the buyers complete control over common areas. This can give scope for the buyer to invest in upgrades, or a concierge etc., that can materially improve the rental yield that the apartments can deliver.
“For a substantial investment, it’s important to get good advice,” says Dell. “We would recommend blocks that are close to transport links, are made up of smaller units, as these are more liquid and easier to rent, and are preferably located in areas that promise future capital growth.”
In this regard, W2 is attractive, says Dell, given that it is undervalued compared with neighbouring Mayfair and Notting Hill, and is also benefitting from considerable investment, such as in the regeneration of Queensway.
“We’re also looking on behalf of clients at blocks outside prime central London, such as in Stratford and Twickenham,” Dell adds. “They can offer yields above 5%, which compares favourably with the 3-3.5% available in central London.”
Acquisition of the month: Red Lion Yard, Mayfair W1 – £7,000,000
Our client – for whom we recently acquired Red Lion House – was looking to make further investments in central London property. Through our network, we were the first to be made aware of Lion House, a freehold block of six apartments, located directly behind our client’s house. Strategically, it made perfect sense for our client to acquire the building given its direct proximity to his main house. Our challenge was to secure the property at a sensible price and avoid the block being launched onto the open market.
Given our strong track record of having recently acquired Red Lion House, and our relationship with the agent, we managed to swiftly agree terms at £7 million, saving our client 6.6% from the asking price. This equated to a reasonable £1,826 per square foot, without the property ever being openly advertised. Our client now has an investment with considerable long-term potential, and which provides options for its management, development and use.
Managed sale of the month: Garage, Allen Mansions, W8 – £175,000
Our client, for whom we had sourced an apartment in Allen Mansions, no longer had need for the associated private parking place in an enclosed garage with automatic gate access.
We refurbished the garage, photographed it and posted the results to the Black Brick Instagram account. Despite the very limited potential market for such a space, the social media post attracted the interest of a buyer, and the garage was sold at its asking price within 24 hours. The sale shows the value of Black Brick’s network – and how that network is increasingly accessed online.
On the market: Old Street, EC1 – £5,000,000
We are delighted to offer one of the finest warehouse conversions we have seen in recent years. The 4,000 sq ft freehold house, over three floors, was designed by Charles Tashima architects and has been recently renovated to a high standard with a tasteful mix of both new and reclaimed materials.
It includes a 50 ft reception space on the first floor, an expansive live/work space, three bedrooms and a fully soundproofed recording studio. Located near London’s ‘Silicon Roundabout’, the property would suit a tech entrepreneur or executive in the creative industries.
For more information, or to arrange a viewing, please contact Tom Kain on +44 (0) 20 3141 9861 or email him on firstname.lastname@example.org.