{"id":3388,"date":"2015-11-09T09:38:07","date_gmt":"2015-11-09T09:38:07","guid":{"rendered":"https:\/\/bb.pixelanddot.dev\/market-update\/november-2015\/"},"modified":"2026-01-21T13:33:30","modified_gmt":"2026-01-21T13:33:30","slug":"november-2015","status":"publish","type":"market-update","link":"https:\/\/www.black-brick.com\/insights\/market-update\/november-2015\/","title":{"rendered":"November 2015"},"content":{"rendered":"

<\/a>Coming back down to earth<\/p>\n

\"ComingBackDownToEarth_Web\"Is the logjam in prime London property finally set to start breaking up? Ever since the May General Election, there has been precious little good news for the market. Activity is down, prices at the middle and higher end of the market have been stagnant, and the supply of properties coming available has slowed to a trickle.\u00a0However, there are signs that things could be about to change. The turning point is, perversely, two leading agents cutting their price forecasts. Savills has cut its expectation for Prime Central London price growth this year to -2%, from -0.5%. Knight Frank, meanwhile, has revised its 2016 forecast for annual price growth in prime central London to 2% from 4.5%.<\/p>\n

While this may appear to be a negative indicator, we believe it may \u2013 belatedly \u2013 inject some realism into the market, and help to temper the currently unrealistic expectations of many vendors. The strong economy, the election of a majority Conservative government, and healthy demand at the lower end of the market (driven by chronically low supply and a tax-driven exodus from the \u00a32 million plus segment) have, we believe, encouraged many sellers to expect prices out of line with buyer sentiment.<\/p>\n

We have explained in previous newsletters why we think vendors may have got carried away. The low price of oil is weighing on many overseas buyers\u2019 ability to spend. A strong UK currency is making London property more expensive for dollar or euro buyers. The effects of the Chancellor\u2019s changes to stamp duty<\/a> are still being felt on sales of more expensive homes \u2013 although, here, there are also signs that things are changing. A report from data provider LonRes finds that buyers of \u00a310 million-plus homes are negotiating an average of 93% of the additional stamp duty costs off the asking price.<\/p>\n

Meanwhile, Knight Frank is also reporting that, in the third quarter of 2015, the number of new prospective buyers was down almost a third (-30%) on the same period in 2014. This will increase the leverage of those buyers remaining in the market.<\/p>\n

This will contribute to the more positive longer-term picture. Savills is forecasting price growth of 21.5% for Prime Central London over five years, while Knight Frank is forecasting 22.1%.<\/p>\n

In the short-term, however, overly optimistic sellers and cautious buyers creates stalemate. But with more agents tempering expectations, we are hopeful that vendors will become more realistic on the price they can achieve for their properties. \u201cAn important part of the process is in identifying motivated and realistic vendors,\u201d says Black Brick Managing Partner Camilla Dell. \u201cWe do extensive due diligence on vendors to ensure they are prepared to transact, and are not taking a fantastical view of market conditions.\u201d<\/p>\n

<\/a>34\u00a0completion days to Christmas<\/p>\n

\"34CompletionDaysToChristmas\"When it comes to vendor motivation, few deadlines focus the mind more than the run-up to the Christmas holidays. While many vendors take their properties off the market as Christmas nears, those who don\u2019t are likely to be extremely serious about closing \u2013 giving buyers the opportunity to snap up a bargain.\u00a0It\u2019s no coincidence that both of Black Bricks\u2019 partners bought their family homes at Christmas time. So, while we hesitate to mention Christmas before the decorations on Oxford Street have gone up, it\u2019s worth bearing in mind that, in property terms, it\u2019s closer than you think.<\/p>\n

<\/a>London takes a bite out of the Big Apple…<\/p>\n

\"LondonTakesABiteOutOfTheBigApple\"It\u2019s not all doom and gloom for London\u2019s market. A recent report<\/a> has shown how London has moved ahead of New York in terms of prime residential sales and prices. In 2009, there were just over 2,000 sales in London of houses and apartments in the $2 million-5 million range, behind Hong Kong and about the same as New York.\u00a0Five years later, and London has roared ahead: there were 6,250 sales in that bracket in 2014, twice the number in Manhattan and three times those in Hong Kong, Singapore and Sydney. London has also delivered the highest increase in prime prices over a 10-year period, at 138%, compared with 93% in Hong Kong and 78% in New York.<\/p>\n

\u201cIt\u2019s worth remembering just how favoured London is for real estate investment for the global rich,\u201d says Black Brick Partner Caspar Harvard-Walls. \u201cIts legal, political, commercial and cultural attractions mean that there will always be demand for prime London residential property.\u201d That said, of course, we are always happy to help clients find properties in other global cities, and to that end Black Brick enjoys close partnerships with buying agents around the world. Don\u2019t hesitate to email for more details.<\/p>\n

<\/a>\u2026And its rental market roars on<\/p>\n

\"AndItsRentalMarketRoarsOn\"London also remains extremely attractive in terms of buy-to-let investment opportunities. High property prices in the capital are creating unprecedented demand for rental properties \u2013 which is generating healthy returns for investors.\u00a0The average total return (taking into account rental income and capital appreciation) of buy-to-let property in London was 11.5% in the year to July, according to brokers Reeds Rains and Your Move. This compares with a 2.3% return from UK equities over the same period.<\/p>\n

Rental demand is forecast to continue to rise. Aldermore Bank forecasts that 26% of UK households will lease from private landlords by 2022, up from 18% in 2013. The July budget will see the tax relief on interest payments on buy-to-let mortgages reduced, which is likely to make it less attractive to borrow to purchase buy-to-let properties. This will have the effect of reducing competition for such properties, creating opportunities for cash investors.<\/p>\n

\u201cWe have seen a resurgence in instructions to find buy-to-let properties, with more than half of our clients buying property as investments this year,\u201d says Dell. This compares with less than one-third in 2014. \u201cOur clients consider buy-to-let as an attractive long-term investment, with many buying with a view to passing the property on to children as they get older.\u201d<\/p>\n

However, continuing investor demand means that buyers need to be cautious about overpaying. A good understanding of the local rental market can make the difference between an investment achieving targeted yields and seriously under-performing.<\/p>\n

<\/a>Property acquisition of the month: the Hermitage, Kent<\/p>\n

\"PropertyAcquisitionOfTheMonth\"The difficulty of finding suitable family homes in London is encouraging some of our clients to look further afield. We were tasked with finding just such a property within commuting distance of the capital and close to railway links. With such an open brief, the challenge involved finding both an appropriate locale as well as the right property.\u00a0Such a search would have been incredibly time consuming for our clients. Following a detailed analysis of the most attractive villages, we focused on Kent, and sourced an impressive seven-bedroom period home, with the benefit of a large walled garden, for \u00a31.75 million. We were also able to negotiate our clients a \u00a325,000 reduction on the asking price.<\/p>\n

To view the case study please click<\/span>\u00a0here.<\/p>\n

<\/a>Black Brick at the Bloomberg Summit<\/p>\n

\"BlackBrickAtTheBloombergSummit\"As we flagged in last month\u2019s newsletter, our Managing Partner Camilla Dell participated in Bloomberg Markets Most Influential Summit last month.\u00a0For those who weren\u2019t able to attend, Camilla\u2019s panel session \u2013 \u2018Surreal estate: London Property\u2019 \u2013 is available to watch online<\/a>.<\/p>\n