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<\/a>Diamonds in the rough<\/p>\n It\u2019s no secret that conditions are tough in London\u2019s prime residential market. By some measures, transaction volumes have dropped<\/a> to levels not seen since the Financial Crisis. Overall, prices have fallen sharply from their 2014 peak, although performance is highly uneven<\/a>. But, for well-advised buyers who can move quickly when the right opportunity presents itself, there are still gems to be snapped up.<\/p>\n One such is our Acquisition of the Month, an amazing converted pub in Mayfair (see below for details). While every purchase is different, the circumstances of this transaction are illustrative of how value can be found in a difficult market.<\/p>\n The first element is finding motivated sellers. It\u2019s simply a fact that vendors who do not need to sell are, by and large, keeping their powder dry and waiting for clearer signs that the market has turned, or are waiting for uncertainty, such as around Brexit, to lift.\u00a0 A good example is Almacantar, which is redeveloping Centrepoint<\/a>: it is halting sales rather than accept \u201cdetached from reality\u201d offers, a position it is able to take because of sufficient sales to date and a strong financial position.<\/p>\n Red Lion House<\/a>, on the contrary, was bought out of receivership after it was repossessed by the mortgage provider. Banks periodically review the value of properties on which they have written mortgages, and falling property prices can lead them to require lenders to post additional margin. Where owners cannot do so, the property may be repossessed. Banks then seek a quick sale and are, unlike some owner-occupiers, unsentimental about the price acheived, as long as they recover their capital.<\/p>\n \u201cThrough our contacts, we\u2019re aware of a number of attractive prime properties going through this process that are likely to come to the market soon,\u201d says Camilla Dell, Managing Partner at Black Brick. \u201cThey are likely to offer significant value for buyers who can move quickly.\u201d<\/p>\n Speed is thus the second key element. While the market may be slow, there is considerable pent-up demand for the right properties. In the case of Red Lion House, we knew of at least two other serious bidders, and we and our client had to move fast. \u201cFortunately, our close relationship with the selling agent meant we got early notice of the sale; and it took us just seven days from viewing and reporting to our client to exchanging contracts,\u201d says Dell.<\/p>\n The third element is understanding value. \u201cThere\u2019s no point buying a property simply because it\u2019s cheap if it\u2019s still going to be cheap in five or 10 years,\u201d says Caspar Harvard-Walls, Partner at Black Brick. \u201cThe challenge is finding properties that as well as being competitively priced are also really good quality.\u201d<\/p>\n \u201cThere remains a huge amount of interest in London,\u201d says Dell, noting that, for dollar buyers especially, price falls and sterling\u2019s decline over the last couple of years make London prices extremely competitive. \u201cIt\u2019s a question of finding properties that are sufficiently attractive to outweigh the uncertainties hanging over the market. Such properties are coming up, but buyers need to be confident and be able to move fast.\u201d<\/p>\n For clients interested in learning more about the pipeline of repossessed prime properties expected to come to market soon, please email Caspar Harvard-Walls on caspar.harvard-walls@black-brick.com<\/a>.<\/p>\n \u00a0<\/em><\/p>\n <\/a>A benign Budget for Prime Central London<\/p>\n Chancellor Philip Hammond\u2019s Budget<\/a>, unveiled on 31 October, was an uneventful one for the prime residential market, we are pleased to report. Unlike his predecessor George Osborne, Hammond has avoided frequent raids on the property market and the one concerning proposal that emerged before the Budget \u2013 a potential 3 percentage point Stamp Duty surcharge on non-resident buyers \u2013 appears to have been watered down.<\/p>\n Instead, the government will open a consultation in January on a 1 percentage point additional charge, meaning the tax increase, if it does materialise, is unlikely to be introduced before the second half of next year. At best \u2013 and particularly given the challenge of defining \u2018non resident\u2019 in this context \u2013 the idea may be abandoned.<\/p>\n Like many in the property market, we opposed Osborne\u2019s increases in Stamp Duty on more expensive properties, given the chilling effect they have had on the number of transactions in the market. But research from estate agent Savills<\/a> shows that, overall, London is middle-ranked among global cities in terms of the property taxes faced by non-residents when buying, holding and selling a property.<\/p>\n On a $2 million property used as a second home and sold after five years, they would face total taxes worth around 13% of the property\u2019s value. This compares with almost 35% in Vancouver, around 32% in Hong Kong, and almost 25% in Singapore. London is just behind New York, at around 15%. Moscow and Dublin levy the lowest tax, with both around 5%.<\/p>\n Elsewhere in the Budget, Hammond directed most of his attention to boosting investment lower down the property market, including the extension of Stamp Duty relief to shared-ownership buyers, and moves to allow local authorities to reap more benefit from the increase in land values following the granting of planning permission.<\/p>\n \u201cIt has been a very benign budget when it comes to property and tax,\u201d says Dell. \u201cAs well as taking first time-shared ownership buyers out of Stamp Duty, it makes no announcements of punitive tax regimes hitting buyers looking to upsize, downsize or relocate. This will come as a relief to the industry.\u201d<\/p>\n <\/p>\n <\/a>First forecasts emerge<\/p>\n The first two end-of-year market forecasts have emerged, from JLL and Savills. The former is forecasting<\/a> a modest return to growth for PCL next year (of 1%), before prices accelerate to deliver total growth of 15.3% by the end of 2023. New builds will rise in value faster, by 17.6% over the same period.<\/p>\n JLL analysts are assuming that a Brexit deal will be struck in the coming months, ascribing a less than 10% probability that the UK will crash out of the EU without a deal. It believes that \u201cgreater political certainty will instill renewed confidence to UK businesses and consumers leading to improved housing markets.\u201d<\/p>\n JLL\u2019s forecasts follow those from Savills<\/a>, released earlier in October. It is somewhat more cautious, estimating 12.4% property price inflation over the next five years.<\/p>\n However, it is more negative in the near term, predicting a 1% drop next year, after a 5% decline in 2018, before the market recovers strongly (up 6%) in 2021.<\/p>\n Lucian Cook, Savills\u2019s Head of Research, concedes that its forecast last year was too optimistic regarding a rapid return to normality after a Brexit deal, which it had penciled in for 2019\/20. \u201cWe are pushing back that recovery to reflect the likelihood of an extended transition period once the Brexit deal is hammered out,\u201d he writes.<\/p>\n He also notes that, when the recovery comes, it is likely to be rapid: \u201cWhen prime housing in central London has looked like good value, it has historically bounced back at pace.\u201d<\/p>\n \u201cIt\u2019s hard to predict property prices five years out, and the job is particularly difficult given current political uncertainty,\u201d says Dell. \u201cBut these analysts agree with out fundamental position: once some of the question marks have been removed, significant pent up demand is likely to push the market substantially higher.\u201d<\/p>\n <\/a>Dell to speak at private bank property event<\/p>\n Black Brick Managing Partner Camilla Dell is to speak later this month at the inaugural Wealth Planning Update, organised by EFG Private Bank. She will be providing a property market update, alongside Jatin Patel of Kinnison Finance. The event will also address high-net-worth immigration schemes, the government\u2019s recently introduced Unexplained Wealth Orders, and the use of life assurance wrappers in succession planning.<\/p>\n It takes place from 2pm on Wednesday, 21 November in central London, and is followed by a networking reception. To attend, please email kate.abbott@black-brick.com<\/a> for an invitation.<\/p>\n <\/p>\n![\"\"](\"https:\/\/www.black-brick.com\/wp-content\/uploads\/2021\/02\/Story3-WEB-1.jpg\")
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