The past month has hardly been short of major newsflow: the victory of the anti-austerity Syriza party in Greece’s general election, the European Central Bank’s new €1.1tn programme of bond buying, the removal of the Swiss Franc’s euro currency cap, further proof of China’s slowing economy and, of course, tumbling oil prices.
Yet for all the potentially far-reaching consequences of these events, the major driver of short-term market conditions in prime Central London (PCL) property remains much closer to home. In the wake of December’s hikes in stamp duty on higher value property, there is understandable caution ahead of May’s UK general election and the prospect of further levies. Overall conditions therefore continue to strongly favour buyers.
However, from on-going discussions with our own client base it is interesting to note that where there is mild caution it is currently only about when to buy and not about whether to buy. The majority of our clients share our view that the run-up to the election may prove to be an attractive opportunity in the long-term. The current weakness in the pound against the US dollar may also prove to be transient – but buyers with dollar wealth now have a 12% discount compared to prices in the summer in dollar terms.
The softening in market conditions is evidenced in the latest market data from Knight Frank. Their Prime Central London Index fell for a third consecutive month in January, albeit only marginally. At 4.6%, the annual pace of growth at the end of January is the lowest for some five years. There is evidence too of a slowdown in the wider UK housing market, despite five and ten year fixed mortgage rates hitting new all-time lows. According to the monthly Nationwide House Price Index, the annual pace of house price growth slowed for a fifth consecutive month in January. However, Nationwide points out that overall affordability levels do not appear stretched at a national level due to the low level of borrowing rates.
At 2% to 4% dependent on location, overall yields on London property remain low by historic standards. But the recent softening in PCL property prices at least provides a small fillip to potential investors in rental yield terms. Meanwhile, the uncertainty over the outcome of May’s election and the potential for a Mansion Tax is persuading some potential buyers to rent. Additionally aided by a robust London economy, new rental applicants have risen sharply in recent months just as the number of available properties to rent is falling. Market fundamentals therefore appear strong. Against this backdrop, Hamptons International predicts annual rental price growth of 6.5% across Greater London in 2015 and 5.0% in 2016.
Even with demand for rental property strong, getting the right tenant and keeping that tenant happy can be the key to minimising the risk of void periods and boosting long-term returns. We have seen significant growth in our own Property Management services over the past year. Our full service and proactive approach adds significant value and is based on the strongly held belief that a happy tenant is less likely to move and is more amenable to rent rises.
London is the most dynamic city in the world according to a report by commercial property giants Jones Lang LaSalle. The 2015 JLL City Momentum Index heralds London as the world’s most dynamic city based on its strong economic fundamentals, high levels of cross-border investment, positive outlook and reputation as a global tech hub. JLL’s City Momentum Index ranks 120 global cities by factors including investment, property prices, and connectivity, research & development, technology and business start-ups. Of the other major ‘global’ cities to which London is often compared Sydney ranked 11th, Singapore 17th and New York 18th. San Jose, Boston and San Francisco, all viewed as being centres of excellence for technology, all made the top 10.
Ben Burston, Director in UK Research at JLL, said that London’s ranking reflected the capital’s “established status as the world’s leading destination for real estate investment. It also recognises London’s rapidly growing presence as a global tech hub, which is widening the occupier base in the office market.” Educational infrastructure, innovation capability and a large number of high-tech firms will secure London’s position as the leading global city in the years to come, according to the report.
Among our recent new clients is an English couple looking to capitalise on the rise in London house prices to fund their move to the commutable ‘Home Counties’ that surround the capital. Given that the differential in prices can exceed £3,000 per square foot, selling in the capital to move to Kent, Surrey, Hertfordshire, Essex and Oxfordshire is an increasingly popular trend. According to recent research, the number of Londoners buying outside the capital doubled last year from 2013.
The temptation to cash-in is particularly strong for families looking for more space and baulking at the additional cost of larger properties within London itself. Momentum behind the trend has also accelerated due to the jump in house prices in outer London boroughs, where domestic family owner occupiers make up a larger proportion of homeowners.
The problem for our clients was the sheer size of their effective search area. In London, once we have helped our clients identify the areas and streets that best fit their requirements it is possible to view several properties within the space of an hour simply by walking between them. Things are not quite so simple when your search area includes all of the Home Counties with a good train service into London.
Like the overwhelming majority of working couples, viewing properties during the week is not a possibility for our clients. Time at the weekend is limited and precious. It is also often harder to arrange viewings at weekends when the vendors themselves are at home.
At the moment we are viewing numerous properties on behalf of our clients in four different counties. We are checking for the feel of each village where we have identified suitable properties, the nearest shop, the quality of the local pub, potential road noise and a host of other small factors that can make or break a deal but do not appear in the online details and are often initially missed by buyers.
We are saving our clients a huge amount of time by narrowing the search on their behalf. The overwhelming majority of buying agents wouldn’t dream of taking on such a time consuming remit. But this is precisely where we believe we add value to our clients – saving them time but perhaps just as importantly making the process of buying a new home simpler and less stressful. It also demonstrates that buying agents are not just for the overseas High Net Worths buying in London, but also very much for anyone who would benefit from an industry expert simplifying the process and saving them time. We are one of the very few independent London agents whose coverage extends outside of the capital.
February’s Property of the Month is another Black Brick success story for a buyer with exacting instructions. Our client was looking for a two bed, two bathroom apartment in good condition in a portered building in a good area genuinely close to Central London. The layout had to have a clear distinction between the sleeping space and living area. Our client also wanted a separate utility room. With a budget of £1.2m, ticking all the boxes was clearly going to be a challenge.
However, through our intimate knowledge of developments all over London we identified an apartment in the popular Harbour Reach development a short walk South of Fulham Road and adjoining Chelsea Harbour. Not only did the apartment meet the client’s exacting criteria for less than his budget, but it also came with a balcony offering views of the Thames. To view the case study please click here. Great apartment. Happy client. Job done.