Buy-to-let investors prepare to swoop on housing market downturn

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Buy-to-let investors prepare to swoop on housing market downturn

If house prices fall, investors can pick up properties with higher yields. Especially as rents are unlikely to fall as much as sale values

By Melissa Lawford.

The property market is in limbosales are on holdlandlords are struggling, and mortgage searches last month were down 44pc on the previous four-week period, according to the online provider Twenty7Tec.

But some buy-to-let investors are spotting opportunities, and are getting their deals lined up for when the restrictions on purchasing are lifted. The share of buy-to-let mortgage searches on Twenty7Tec saw a small uptick last month. In the capital, prospective investors are “circling”, said Camilla Dell, managing partner at London buying agency Black Brick. “There’s a lot of cash swirling, looking to swoop in,” she said.

While analysts are not anticipating a house price crash, they are forecasting some falls in the short term. The latest survey by the Royal Institution of Chartered Surveyors (Rics) suggested sales expectations in the next three months are the lowest ever recorded.

Savills has forecast a short-term price drop of 5-10pc. “You need only look at the rate that lenders have pulled out their mortgage offering,” said James Tucker of Twenty7Tec. Nearly a third of the mortgage deals on offer have been retracted.

For buy-to-let investors, short-term price falls mean long-term yield increases. In London and the South East, high property prices have meant low yields, leading to an exodus of buy-to-let investors to the North, seeking higher returns. But falling prices have already been boosting rental yields.

House prices in the borough of Kensington and Chelsea were 11.1pc down year-on-year in the last three months of 2019, according to estate agency Hamptons International. This meant the borough recorded the second-largest jump in rental yield of all local authorities in the country. Yields climbed 1.5 percentage points in two years, to 4.2pc.

Similarly, property prices in the City of London fell by 1.7pc, which helped boost yields by 1 percentage point over two years to 5.2pc. If price falls continue, London could open up again to domestic landlords who will be able to get higher long-term yields on their investments. This may even be enough to offset the effects of the reductions in tax relief on buy-to-let mortgages which have seriously hit investors’ pockets since their phased introduction began in 2017.

This is particularly the case because rents are unlikely to take the same hit. Rents do not move in line with house prices, said Gráinne Gilmore, head of research at Zoopla.

After the last financial crash, “the rate of decline in rents was more modest than capital value for homes,” said Ms Gilmore. “When house prices dipped into negative territory in 2011, rents were growing at the strongest pace in four years.”

When the sales market is stalling, people are more likely to hold off on purchases and stay in rentals. “When there is uncertainty, the rental market comes into its own,” added Gary Hall, head of lettings at estate agency Knight Frank. It has forecast that house prices will fall by 3pc over the course of 2020, and that London rents will stay constant. There is an opportunity for investors here, said Angus Stewart of the digital buy-to-let broker Property Master, “as long as they’re sufficiently liquid”.

Those looking to invest will find that they have new competition: short-term landlords are being squeezed by the collapse of the travel industry, and there is already an influx of these properties to the long-term lettings market. Another point of competition could be vendors who are unable to sell their homes if there is a downturn, and so may become accidental landlords.

But Mr Hall is bullish. “Last year we had eight applicants to every rental property listing,” he said. He does not anticipate that rental supply will outstrip demand.

So where will be the best places in the country to invest? Hartlepool in County Durham has the highest rental yield of any local authority in the country, according to Hamptons International, at 11.9pc. The average house price is £113,160. Meanwhile, Pendle in Lancashire has recorded the largest jump in yield growth in the last two years, up 1.6 percentage points to 10.1pc.

When it comes to investing, Mr Hall recommends new stock. “We agreed 27 tenancies last week and the majority were new-build,” he said. Tenants feel more comfortable moving into unoccupied properties, he added. Developers with cash flow problems might also be more open to negotiations on sale prices.

But perhaps the most important factor for investors in the wake of the lockdown will be local employment rates, said Aneisha Beveridge, head of research at Hamptons. These will underwrite rents during the coming months. While the biggest cities will be safer bets, the current winner is the local authority of Eden in Cumbria, which currently has an unemployment rate of 1.6pc. The average house price is £198,480, according to Hamptons.

Stamp Duty Holiday: Could It Stimulate Recovery Of The Housing Market?

By Gary Barker

The spread of the coronavirus (COVID-19) throughout the country has resulted in an almost complete standstill of the housing market as buying and selling property has effectively been put on ice. 

At the least we have the short-term implications of the current lockdown as the restrictions impose strict limitations on property transactions and on estate agents’ capabilities to perform critical functions at a time when there are contractual obligations to meet and chains face delay or upending. 

But in the long-term as we gaze ahead to the rest of the year and beyond, the economic damage looks to be significant, which has led the Royal Institute of Chartered Surveyors (RICS) to suggest that a stamp duty holiday could be a powerful financial relief vehicle to stimulate the economy at the critical moment when the lockdown is lifted and business and life as we know it can resume.

Such a suggestion from the usually conservative RICS follows the latest release of their March 2020 UK Residential Market Survey, which aggregated from its respondents that a net balance of buyer demand had dropped from +17% previously to a staggering -74%. Sales expectations for the next three months are equally bleak, with a net balance of -92% of respondents representing the weakest figure on record since the first RICS survey back in 1998.

Simon Rubinsohn, RICS Chief Economist, said: ‘The feedback from the survey does imply that further government interventions both in the wider economy and more specifically in the housing market may be necessary to aid this process supporting businesses and people back into work.’

Hew Edgar, RICS Head of Government Relations, added: ‘These are exceptional circumstances and the government will need to consider all avenues that could feasibly rebuild confidence, bridging the gap between uncertainty and recovery. RICS is not an organisation that would call for a stamp duty holiday on a whim, and indeed our view prior to COVID-19 was that it required a full-scale review.’

This is not the first time that a call for a review of stamp duty has come to the fore. House buyers and property agents have rightly been clamouring for it for years, myself included for various reasons, but particularly due to the heavy impediment it places on many transactions.

But these are unprecedented times and it is readily apparent that supporting the housing market will be essential to restarting the economy when the lockdown is lifted. A stamp duty holiday would go some way to boosting consumer confidence, and failure to act now could well lead to further difficulties in the housing market later this year.

The latest Residential Market Outlook from Knight Frank estimated that total housing sales for 2020 would sit at approximately 734,000–a decline of 38% on 2019’s total figure–and that whilst sales will resurge in 2021, climbing 18% above 2019’s total, it would not be sufficient to offset the drop this year.

Following the release of the forecast, Knight Frank added to the voices calling on the government to think about how to restart the housing market, beginning with stamp duty.

Tom Bill, Knight Frank Head of London Residential Research, said: “The government understands that moving house has enormous knock-on benefits for the wider economy. Anything it can do to kick-start the process once lockdown measures are relaxed will have ramifications far beyond the housing market. A material cut in stamp duty or an extended SDLT holiday should be central to these efforts.”

Savills in late March estimated that if transaction activity were to decline in the range of 20% and 40% by June, and hold as such until September, the total number of transactions for 2020 would be somewhere between 38% and 53% of the total number of transactions the agency forecast for 2020 in November last year. 

Furthermore, the agency projected that the Treasury stands to lose almost £5 billion in stamp duty revenue. On a positive front, the suppressed demand will likely lead to a demand build-up and support house price growth

Lucian Cook, Savills Head of Residential Research, said: “Assuming long term damage to the economy is contained, we expect the five year outlook for prices to remain similar to our November 2019 forecasts but with a different distribution of growth year to year.”

Nevertheless, a silver lining to a stamp duty holiday, or even merely a cut to the levy, is that it will further encourage both upsizing and downsizing from parties formerly reluctant due to cost. 

It would also be hugely beneficial to the construction industry–which in February had its worst month since 2009–as builders would be able to increase supply knowing they could add an additional 1-3% to the property price. 

There is no doubt the fear among many that the government will attempt to raise the stamp duty levy to recoup taxes from their coronavirus spending. But this is unlikely, as Camilla Dell, Black Brick Managing Partner, comments: “If you look at past recessions and the speed of the property market recovery, we can predict that the Treasury will most likely not raise stamp duty to make up for this until a year or so down the line, once property prices and transactions have risen again.”

Yes, at a time when the government is spending billions to support the economy, a stamp duty holiday would hurt incoming tax revenue. And with all the pent-up demand I suspect the government may have difficulties implementing it given all the existing spending. But in the long run such receipts can be recovered, and I would argue that firm, stimulative actions now, such as a stamp duty holiday, would pay dividends for the recovery of the housing market and economic growth in the long term.

Calls grow louder for full-scale overhaul of UK property tax

Stamp duty has been fiscal weapon but whole regime deemed too complicated

By James Pickford

Stamp duty has become the UK government’s “fiscal weapon of choice” in the housing market but calls for a full-scale overhaul of the property tax are growing as new surcharges and reliefs spark criticism of an increasingly unwieldy regime.

The charge, paid by buyers on property purchases above £125,000, has been subject to a string of tweaks and accretions in the past six years, as ministers have used it to favour some purchasers, such as first-time buyers, with reliefs and discourage others, such as buy-to-let landlords, with extra rates.

The next group set to find itself paying more is non-UK-resident buyers, after Whitehall officials told the FT this week that a stamp duty surcharge of up to 3 percentage points on overseas purchasers of UK property was expected to be included in the Budget on March 11. Receipts from the additional tax are to be used to tackle rough sleeping.

The measure comes after a 3 per cent surcharge was introduced in 2016 for those buying second and buy-to-let homes, in a move aimed at dousing activity among landlord investors. If the new surcharge on non-residents is confirmed at levels close to 3 per cent, overseas buyers who already own a home could end up paying up to 18 per cent in stamp duty on the portion of the purchase price over £1.5m.

Camilla Dell, managing partner of buying agent Black Brick, said the 2016 surcharge, particularly for those whose house sale falls through leaving them with two properties, had created new administrative difficulties. “The whole property tax regime has just become too complicated. It’s a headache,” she said.

The latest fiscal salvo targeting overseas buyers sent a curious message under a post-Brexit government with bold international ambitions, she added. “I don’t believe foreign buyers are the root cause of problems in the housing market. I think they’re an easy target for the government because they don’t vote.”

In the 2017 Budget, then chancellor Philip Hammond unveiled stamp duty relief for first-time buyers of homes worth less than £500,000. This followed another major change in 2014 — one broadly welcomed by the market — when his predecessor George Osborne did away with the old “slab” system of stamp duty, under which a single rate was charged on the entire value of the property.

It was replaced with a “slice” arrangement where higher rates only apply to the portion of the value above certain thresholds.

Even so, the “bolt-on” approach to stamp duty changes has drawn many detractors, far beyond the estate agents who habitually complain of its chilling effects on sentiment. Transaction taxes are anathema to economists and housing market experts who say they benefit those who stay put and penalise those who move. Neal Hudson, director at housing market research firm Residential Analysts, said: “It’s a stupid tax and not how you would go about taxing property if you were to start from scratch.”

The Institute for Fiscal Studies, a think-tank, has described it as a “dysfunctional” tax and has urged Rishi Sunak, chancellor, to reform council tax to increase charges on more valuable properties. The valuations on which council tax is based have not been updated since 1991.

The Royal Institution of Chartered Surveyors argues that the changes since 2014 have helped first time buyers but deterred existing homeowners from considering a move. “We therefore believe government should establish a review to address all fiscal measures which impact housing supply, the taxation of homeowners and landlords, and encourages innovation and improved infrastructure,” it said.

Even Sajid Javid, who resigned last month as chancellor, has spoken out against the current state of stamp duty, telling the Times last weekend that it was “too high”, “very distortive” and “needs significant change”.

But the political appeal of a root-and-branch overhaul is unclear, particularly when the government is absorbed in managing the coronavirus crisis. Stamp duty has become an increasingly important source of tax revenue in recent years, generating £8.37bn in tax receipts in 2018-19, according to provisional government figures. Much of this is accounted for by sales of homes in London and the south-east. Transactions in these two regions brought in £5.07bn, 61 per cent of the total for England and Northern Ireland.

In light of prime minister Boris Johnson’s repeated commitment to “level up” economic inequalities between regions, the political gains from forcing through radical changes to a tax that is largely paid by wealthier groups in the south of England are questionable.

Politicians last year flirted with the idea of switching stamp duty from a tax paid by the buyer to the seller, but economists argue that such a measure would simply raise prices. Longstanding alternatives in the shape of a land tax or reform of council tax, though backed by economists, remain unpalatable for Conservative MPs mindful of their constituents’ economic interests.

When the Daily Telegraph reported last month that stamp duty cuts were under discussion in government circles, it was notable that any reductions were said to be tied to the introduction of a “mansion tax”, said Lucian Cook, residential research director at estate agent Savills.

“That gives you a fairly strong clue as to the extent to which the government are going to be protective of their tax revenues. They were looking for a means by which they could make any changes revenue neutral.”

Mr Cook concluded that the prospects of a thoroughgoing revamp of Britain’s housing transaction tax are remote. “Stamp duty has become the government’s fiscal weapon of choice as far as housing is concerned. It is probably due an overhaul. The issue is whether anyone’s got the stomach to do it when it continues to be a significant cash generator for the Treasury.”

Is coronavirus having an impact on overseas tenant demand and investment?

By Matthew Lane.

Coronavirus – also known as Covid-19 – has had a dramatic impact on the world since the first reported cases in China at the backend of last year.

Since then, it has spread to almost every part of the world, with the lockdown of major cities, cancellation of sporting events and self-quarantining of people showcasing symptoms or returning from the worst-affected areas.

China has had by far the most cases, but Italy, South Korea and Iran have all struggled badly to contain the virus in recent weeks. In Britain, where 115 cases have so far been confirmed, the government recently released a six-point action plan to combat the spread of coronavirus, including calling the army in to help if civilian authorities are struggling to cope, closing schools and advising elderly people – who are most at risk of the virus – to stay away from large social gatherings.

Across the world, from hotels in Tenerife to cruise ships in Japan, the coronavirus has caused panic and consternation.

While the mortality rate is reassuringly low (around 1%), four in five people with the virus only show mild symptoms and those most at risk are the elderly and those with pre-existing health conditions, fears have been sparked about the possibility of a global pandemic as the number of cases has soared.

Stock markets have been swinging wildly, regional airline Flybe has collapsed, health bosses have raised concerns about the capacity of health systems to cope with a sudden spike in cases, and there has been talk of major global events such as the Olympics and Euro 2020 being postponed or cancelled to stem the virus.

At the same time, there has been an ongoing battle against disinformation – with myths and falsehoods spreading via social media quicker than public updates can be provided – as world leaders try and disseminate accurate information to their citizens ahead of the half-truths and fake news.

The health crisis has had a noticeable impact on all parts of life, with airlines grounding flights, Airbnb’s profits taking a hit, popular tourist attractions virtually empty and people cancelling holidays and business trips.

It’s affected the property world, too, with March’s flagship MIPIM conference being pushed back to June after a number of high-profile attendees pulled out.

But what impact is it having on tenant demand in the UK from China, the country worst affected by the virus with the bulk of cases and deaths found there?

Megan Wang, Asia Desk Lead at Build to Rent referrals platform Houzen, said: “I deal mostly with Chinese student tenants and applicants, as well as Chinese investors in UK properties, on a daily basis. In the last 2-3 weeks, any kind of processes related to bringing new tenants to the UK are being severely delayed.”

She said people in China are not willing to travel internationally, and many of them have delayed their arrival to the UK to September/October-time, instead of the common summer season.

“There’s still a high demand for property viewings, however we switched in 70% of cases to virtual viewings, by video call and WeChat. Most of the applicants don’t have a problem viewing a property this way and are comfortable making their decision just based on that. In terms of how many people might actually arrive in the UK later in the year, I see a potential for a spike in the number of international students moving to the UK.”

She added: “Some universities lowered their required grades for Chinese applicants, so if the situation with coronavirus gets better soon, we might see an even higher number of incoming students later on. In terms of property sales – it doesn’t look like the usual market is affected yet. However, I did hear about some buyers looking for properties to buy outside of mainland China as a ‘safety home’ in case the situation gets more serious. This is just a very rare comment for now, though.”

Terry Mason, group operations director at rent guarantor service Housing Hand, said the coronavirus remains a worry to all in the lettings market. “At present we have seen very little effect – however, it has the potential to be devastating,” he explained.  

“If the virus spreads and becomes a pandemic around the world, then people coming to the UK needing to rent property will drop dramatically. On the other hand, those from abroad who are already here may not be able to (or wish to) return home – but will they have the means to pay their rent?”

He added: “In the short-term, I think it’s business as usual, with everyone watching the economy for any change in their business income, essential for paying wages. If the virus spreads, we could see businesses unable to pay staff and redundancies leading to many tenants being unable to pay their rent.”

Mason said that, if companies are not hiring or students decide not to travel to the UK for university courses, ‘we would have a huge oversupply of available lets and a whole year of letting upset’.

“I think we are in the balance now; the outcome depends on containment,” Mason concluded. “Currently, the numbers here are extremely low, as is the risk of catching the virus, let alone dying from it, but looking at the worst-case scenario should help people take the necessary steps to help containment.” 

What about overseas investment?

Camilla Dell, managing partner at buying agents Black Brick, said the impact on Prime Central London – where many overseas investors, especially from South East Asia, purchase property – had so far been minimal. 

“Although a fair proportion of PCL homes are bought by HNW international buyers, we haven’t yet had many clients talking to us about the coronavirus,” she said.

“However, with some employers asking staff to self-isolate and work from home, we can predict that home offices will become more popular.”

She added: “We’ve seen a variety of buyers interested in properties with large studies, or serviced executive suites within luxury developments; and this is part of an ongoing trend for people to work more flexibly, aided by increasingly agile technology within the home.”

Hannah Aykroyd, managing director of boutique property advisory firm Aykroyd & Co, said stock markets have dropped (and since slightly recovered) in response to news about the coronavirus, and ‘in general, investors around the world are slightly holding their breath to see how things unfold’.

“At Aykroyd & Co, we have had two foreign buyers ask us to put their searches on hold temporarily due to travel restrictions or concerns about travel restrictions,” she continued. “However, in one case, we solved the problem with a creative approach and carried out a remote purchase.”

“Equally, we have two separate clients in town from Hong Kong who have been here since the news first broke and are using the time to focus on property investment in London. As a result, we are advising on building out a property investment portfolio which we would both acquire and manage for the long-term.”

Aykroyd said it was important to note that ‘neither we nor our clients are worried about the long-term resilience of the London property market, particularly at the top end’.

She claimed PCL residential property has been the best-performing asset class in the world over the past 25 years – through all kinds of crises.

“We are currently in a buying opportunity and this will not change with the outbreak of coronavirus. Savvy investors are well-aware of this.” 

 

Why London’s imminent property boom is not all that it seems

Why London’s imminent property boom is not all that it seems 

By Melissa Lawford

Typically, after the Christmas break, the housing market in London is “an absolute desert,” says Simon Barry of Harrods Estates. This year is a different story, he says. In the wake of the Tory election victory, estate agents seem instead to find themselves in an oasis.

Even the Russian buyers are coming back.

Sales of luxury homes have spiked in the capital, a market which has long been in the doldrums. In the month after the election, sales of £2 million-plus homes have jumped by 69 per cent year-on-year, according to analysis firm LonRes.

Everyone is waiting for the surge to translate into price rises. “It is happening, we can feel it happening on the ground,” says Caspar Harvard-Walls, a buying agent at Black Brick. “Straight away, sellers who would have maybe taken 5 or 10 per cent off their asking price now won’t budge.”

New listings are now being set a few percentage points higher than they would have been this time last year, he adds, so “we have to be a lot more aggressive in negotiation.” Soon, he says, “people will begin to think they have missed the bottom of the market.”

So is the London property market about to go bonkers?

The headline figures of the latest HMRC stamp duty receipt data are utterly boring. Overall, in the last three months of 2019, total sales volumes in the UK moved by less than half a per cent. 

But look closer: from October to December, the number of £1 million-plus sales jumped by 12.8 per cent on the same period in 2018 to a total of 5,300. “That is the highest number of £1 million-plus residential transactions for the last quarter of a year in at least the last decade,” says Lucian Cook, research director at Savills. 

The implications for the luxury sector of the London market are huge. The largest concentration of these properties is in London and the South East, says Cook, and the numbers likely reflect “the banked sales after the election”.

Rightmove reported that January was its busiest month ever, and said that agreed sales in London jumped by 26.4 per cent on last year’s total.

While the biggest jump is in the number of super-expensive prime London homes sold, the boost is not just in the glitzy heartlands. LonRes found that in January, sales of homes in “prime fringe” areas, such as Clapham and Southwark, were up by 28.4 per cent year-on-year.

But there is a major caveat: the number of homes sold might be up, but prices are still down. Prime London sales prices were 5.5 per cent lower in January than the year before, according to LonRes. This is a time to buy a bargain, and while some vendors may well be taking a punt at hiking their prices, but they are certainly not the ones who are currently making sales.

And if they do raise their asking prices, this will likely start to stall the market again. “A sustained pick-up in activity depends on sellers keeping price expectations in check,” says Cook.

Across London, “affordability will be a limit on price growth,” says Neal Hudson of research firm Residential Analysts. Demand might be up in the capital, but that does not change the purchasing power of buyers, particularly first-timers, who are limited by mortgage regulations and prices that are still sky-high compared to wages.

The election result was not necessarily the turning point that it has been hailed as. The HMRC figures suggest that the momentum currently taking over the market started over the summer, and continued through the rest of the year. Typically sales fall off after September.

Calling the recent rise in London sales a ‘bounce’ is a misnomer, says Barry. “The momentum has been building for months.” That shows that, certainly in the wider London market, the right pricing of a property matters more than political clarity.

Sellers should also note that the current pick-up in activity is nowhere near as big as it sounds. “Prime central London is recovering off a low base,” says Hudson. Both 2018 and 2017 had weak ends of the year. The numbers “in part simply reflect things being not as bad as they were,” he adds.

There are also some more hurdles on London’s horizon. Brexit trade negotiations will bring back the uncertainty the the election result temporarily pushed away, says Cook. 

There is also the government’s pledged introduction of a 3 per cent surcharge on overseas buyers. This is likely to “put buyers off at the lower end,” says Hudson. It will be the foreign investors buying one- and two-bedroom buy-to-let flats who will see their yields significantly hit by the extra tax. 

As for the multi-millionaires, they will simply refuse to pay the extra, says Barry. When stamp duty goes up, “it’s been vendors who pay most of it [by lowering prices],” says Barry. “We have seen the market fall from a great height since the 2014 stamp duty changes.” 

London is also part of a wider story of global prime real estate. “There are signs that prime markets across the world are struggling,” says Hudson. He notes the downturns in Vancouver and New York in particular. The rule of the old guard could simply have come to an end.

“We could see a stronger market for a number of months,” says Hudson. As there is a shortage of homes on the market and a low turnover of property, it doesn’t take much for transaction growth to filter into price rises. “But that trend for rampant growth that we saw from 2010 to 2014 is unlikely to return.”

Home sales slide in Battersea Nine Elms

‘Disjointed feel’ of the huge regeneration project blamed for putting off buyers

Less than 24 hours after the Conservative party victory in December’s general election, interest in south London’s prime property market was already picking up. “I had a businessman from the United Arab Emirates, who had been sitting on the fence for months, call me up and say: ‘Let’s move,’” says Marc von Grundherr, a director of estate agency Benham & Reeves. Later that day, they were finalising a deal worth £1.7m for a three-bedroom apartment in Battersea Power Station, the much-loved industrial building being converted into high-end homes on the south bank of the Thames. Developers in the wider Nine Elms area — the vast regeneration project surrounding the power station — will be hoping post-election optimism will ripple outwards. Parts of the area, which will eventually see the completion of 20,000 new homes, as well as landmark new office projects, still resemble a building site. And home sales have slipped recently.

In 2017, the year several of the residential projects were completed, 1,219 sales in Nine Elms were recorded on the Land Registry — though many would have taken place beforehand, while construction was still ongoing. In 2018, 479 homes were sold in the area; in the first nine months of last year, just 284 sales were recorded. Some investors bought homes in Nine Elms before they were completed, hoping to flip them for a profit on the resale market. Instead, an increasing number have had to slash prices. According to Zoopla, a few Nine Elms homes have had their prices cut by more than 25 per cent since being relisted for sale.

“We’ve had Middle Eastern conglomerates call us up and say: ‘Look, we bought 45 properties in a development that’s right next to the power station, right next to Chelsea: why aren’t they selling?’” says Mayow Short, head of Savills’ Battersea office. (Anyone who bought in Nine Elms thinking their new home was “right next to Chelsea” might be disappointed — Sloane Square is on the other side of the river.) “Plenty of [investors] were buying from hotel suites in far-flung parts of south-east Asia, without having scrutinised the plans, the layout or the market outlook,” says Roarie Scarisbrick, a buying agent at Property Vision.

Some might have thought they were getting something by the river but ended up in “an armpit of a corner” with a view of the railway and eight lanes of traffic, he adds. “A lot of people got caught up in a frenzy,” says Camilla Dell, a buying agent at Black Brick.

While the redevelopment of the power station has been carried through according to a well-worked master plan, says Scarisbrick, he thinks the rest of Nine Elms has a “disjointed feel” and that it is the result of multiple developers all pulling in different directions. Still, many think the long-term prospects for Nine Elms look much brighter. Aside from it being home to the new US embassy — which opened in Nine Elms in 2018 — a new Apple HQ is due to open there next year, as are two new Tube stops on an extension of the Northern Line.

Next to the US embassy, a new development by Ballymore called Embassy Gardens is gearing up for the launch of its “Sky Pool” this summer. The transparent, 25-metre pool will be suspended 35m off the ground between two blocks of flats. Ballymore declined to reveal the price of the project when contacted by the Financial Times.

Some Battersea residents think the Nine Elms site feels cut off from their neighbourhood. “I get the feeling that the people moving to the riverfront are almost turning their backs on the rest of Battersea,” says Jeanne Rathbone, who has lived in the area since 1962 and affectionately refers to the power station — which is one of the world’s largest brick buildings — as “the Taj Mahal of south London”.

New-builds nearly always carry a premium over existing stock, and homes in Nine Elms are no exception. The average sale price of an apartment there is 48 per cent higher than the average in Battersea, according to LonRes using Land Registry data.

In any case, families often opt for the Victorian terraces near Battersea Park. On Octavia Street, Savills is selling a five-bedroom house for £1.995m. A two-bedroom flat on Prince of Wales Drive is on sale for £750,000, though John D Wood & Co.

“People are quick to bash Nine Elms and that part of Battersea,” says Dell, “but that’s oversimplifying things.” In five or so years’ time, the clatter of power tools will hopefully no longer fill the air and the wind-tunnel streets around the US embassy will have been transformed into the thriving community spaces that developers have promised. Because of its potential, Battersea is an area “worth considering”, she says.

Porsche design

Why luxury brands want to sell you a home

 

By Judith Evans.

Wealthy people are being targeted with homes by Porsche, Armani and Bulgari – but are they buying?

Judith Evans explores the burgeoning international trend for branded luxury homes, for the Financial Times.

Porsche design

A 25-metre swimming pool stretches out before us, its immaculate tiles glinting in the soft, artificial light. Empty loungers with untouched, crisply folded towels are dotted around and the air is freshly scented, like an expensive beach club. But this is no beach: we are five floors beneath the rainy grey streets of London’s Knightsbridge. A few minutes earlier, a scarlet Rolls-Royce Phantom glided past the entrance.

The 2,000 sq m spa of the Bulgari Hotel and Residences London is an underground paradise — not only for guests on weekend jaunts to the UK capital, but also for the longer-term enjoyment of a very select few.

Simon Nixon, founder of MoneySuperMarket.com, is one. The comparison-site billionaire bought a Bulgari Residence attached to the hotel seven years ago for £39m, according to The Times (a figure his spokesperson does not dispute). Access to the spa — which includes a “vitality pool entirely covered by gold-leaf tiles” — is among the many benefits.

It is a different world entirely from that of the cash-conscious consumers whose appetite for cheap deals helped Nixon build his fortune. In buying his Bulgari Residence, he joined a growing band of ultra-wealthy homeowners. “Branded residences” — most of them linked to luxury hotels and serviced by them — now account for 65,000 homes around the world, according to the estate agents Savills.

Bulgari’s Hotel and Residences, Knightsbridge, London, where a select few — including Simon Nixon, founder of MoneySuperMarket.com — enjoy an opulent lifestyle

Bulgari’s Hotel and Residences, Knightsbridge, London, where a select few — including Simon Nixon, founder of MoneySuperMarket.com — enjoy an opulent lifestyle.

The Bulgari spa boasts a pool that is covered in gold-leaf tiles

The Bulgari spa boasts a pool that is covered in gold-leaf tiles © Roberto Bonardi.

They range from the discreet — a grand but quiet block under construction in Mayfair will be serviced by the Dorchester hotel — to the flashy. A Porsche-branded tower in Miami includes a patented “Dezervator” elevator to bring you and your car all the way up to your apartment, where you can gaze at it through a glass wall between your garage and living room.

Armani-branded residences in Dubai’s Burj Khalifa, the world’s tallest building, can be bought on the second-hand market for as little as £460,000. One vendor boasts in his online listing of his property that it “showcase[s] Armani’s understated, luxurious style. No Versace bling-bling nonsense here.”

Branded homes are springing up wherever rich people live: in the Swiss Alps, the resorts of Bali, the beaches of Barbados and the Cotswolds. Bulgari, the jeweller, has built apartments at almost all its global hotel locations. According to Savills, branded residences fetch a 35 per cent premium over similar, unbranded luxury homes globally.

In emerging markets, that figure can reach 70 per cent — despite the fact that service charges are high and some hotel services command an additional fee. “Upscale” branded developments — a step down from “ultra luxury” — are also on the rise, according to Savills.

“Buyers are getting more demanding, the world is getting smaller, and expectations of service levels are getting increasingly globalised,” says Fred Scarlett, sales and marketing director at Clivedale, a developer that builds homes with hotel brands. He adds that branded residences have been subject to both “consumer pull and market push”: “Everyone is trying to do something different from everyone else.”

Janis Joplin in the lobby of the Chelsea Hotel in 1969: the singer spent time there with resident Leonard Cohen

Janis Joplin in the lobby of the Chelsea Hotel in 1969: the singer spent time there with resident Leonard Cohen © David Gahr/Getty Images.

Janis Joplin to Margaret Thatcher

Living in hotels has a long history, from Leonard Cohen and Janis Joplin in New York’s Chelsea Hotel in the 1960s and 1970s to Margaret Thatcher, who lived out her last days in a suite in London’s five-star Ritz hotel in the early 2010s.

But today’s branded residences are different: a slick, corporate offering designed to reassure wandering and would-be billionaires that their pad in Kuala Lumpur is as convenient and secure as the one in Paris. It is a trend that reflects the internationalisation of the high-end property market, and the apartments are the ultimate in brand homogeneity.

Roarie Scarisbrick, buying agent at Property Vision, says: “When London became really international in the early 2000s, people would come — whether from Russia, India, the Middle East, the Far East — and they wanted to live in London with nice, comfortable apartments with air conditioning and security and parking. And we could not give it to them.

“We could offer them tall, thin houses with 100 stairs from top to bottom, or we could offer them a dusty old mansion block with a drunk porter in the daytime sitting at the door. Developers cottoned on . . . The most extreme landmark case was One Hyde Park. Everyone was sceptical about it at the time, but the values have gone up.”

The landmark London residence One Hyde Park: the Candy brothers' project broke house-price records and made headlines with its lavishness

The landmark London residence One Hyde Park: the Candy brothers’ project broke house-price records and made headlines with its lavishness © Alamy.

The Candy brothers’ One Hyde Park in Knightsbridge, serviced by the adjacent Mandarin Oriental hotel and completed in 2009, broke house-price records and made headlines with its shameless opulence. Now a fresh crop of branded homes is entering the London market.

The company behind Hong Kong’s Peninsula hotel is building at least 26 apartments along with a new hotel at Hyde Park Corner, to open next year. Ken Griffin, the US hedge-fund billionaire, has already agreed to buy one for about £100m.

Four Seasons opened a development on Grosvenor Square in 2019. Clivedale is currently building two separate sets of branded residences: 24 homes serviced by the Dorchester hotel on the site of the old Playboy Club next to Hyde Park, and another 80 on Hanover Square with Mandarin Oriental, where prices range from about £2m for a studio apartment to about £25m for a penthouse.

These developments will open their doors to a sluggish market. Many were conceived at the height of the property boom, but for the past four years London’s high-end market has declined; property prices in other major cities, such as New York, are also falling. The enthusiasm for luxury developments has left the prime end oversupplied, even as global cities struggle with shortages of affordable housing.

By the third quarter of 2019, more than 3,100 newly built homes had been completed but not sold in the UK capital, according to the data firm Molior London. This surfeit of choice will test branded developments’ appeal. “Some will sell off-plan, but it will take the experience of walking in there, seeing all the staff bowing and scurrying and smelling the million bloody scented candles [to sell the rest],” says Scarisbrick.

Some developers have quietly changed tack. Reignwood, another developer, had planned to sell 41 residences with prices starting at £5m in the restored Beaux Arts-era building that formerly housed the Port of London Authority close to the Tower of London, and which are serviced by the Four Seasons Hotel in the same building.

But the apartments at 10 Trinity Square have now become part of the hotel’s rental stock, available for short periods or for as long as a year.

Estate agents have suggested the building’s location in the east of the city, away from the glitzier west, was a problem. Four Seasons says: “We recognised a need in the market to serve a different type of hotel guest, those seeking a longer-term stay that would help them feel like a local, but with both the comforts of home and Four Seasons amenities and services.”

Residents can access the hotel’s lavish, wood-panelled, 16-room members’ club, complete with Château Latour Discovery Room and cigar lounge.

Agents had originally publicised six residences for sale at Bulgari’s Knightsbridge location, but just two were constructed, of which only one — Nixon’s home — has an owner listed with the Land Registry. Bulgari declined to comment on the change of plans or ownership. Others are selling well despite the turbulent market: Clivedale says its Dorchester and Mandarin Oriental developments are each two-thirds sold.

Even buying agents, whose trade involves arguing down prime prices on behalf of wealthy clients, say these homes fetch high prices. “[Branded residences] go hand in hand with new-build, which even if it is not branded, fetches a premium anyway. It’s a premium on top of a premium,” says Camilla Dell, founder of the buying agency Black Brick.

Scarisbrick says: “These developments are not showing any signs of this 20 to 25 per cent [prime price] correction that we’ve all been talking about.”

Owners are paying in part for convenience. Spa and gym access are standard, along with hotel security and maintenance, maids, room service and concierge services such as flight booking. Rather than go to the bother of hiring household staff, residents can use those of the hotel, while leaving their possessions in their own home.

Some also offer the option of letting your home through the hotel when you are not using it. Buyers “want something absurdly convenient and comfortable”, says Scarisbrick.

The Aston Martin residences in Miami will be completed in 2022. Whoever buys the $50m Triplex Penthouse wil have access to the last remaining Aston Martin Vulcan

The Aston Martin residences in Miami will be completed in 2022. Whoever buys the $50m Triplex Penthouse wil have access to the last remaining Aston Martin Vulcan.

Technology has made parts of this offering less unusual, however, even as the latest crop of branded residences were being built. Room service in the small hours was once a rare perk; now, notes the Mayfair estate agent Charles McDowell, apps such as Deliveroo and Just Eat have made it a service available to everyone. “The delivery thing has slightly had the wind taken out of its sails,” he says.

But branded residences also sell something less quantifiable. Purchasers of a Four Seasons, Marriott or Mandarin Oriental home are buying into the brand itself: both its nebulous essence and the specific value of a global company with a reputation to uphold. Hence the entry into the market of non-hotel brands, such as luxury goods and automotive marques.

Among the next raft of brands planning to enter the market is Condé Nast, owner of Vogue, GQ, The New Yorker and Vanity Fair, which already runs the GQ Bar in Berlin, the Tatler Club in Moscow and Vogue cafés in four major cities.

The company would not talk to the FT about its specific plans for its residences, but says: “We now view this evolving and expanding branded residential marketplace as a natural next step for our global lifestyle media brands.”

There is also a question of longevity. Brands may hold power now, but the decline of Cadillac, for example, shows the vulnerability even of a marque that once dominated the US luxury car market. Property buyers must be confident that the brand they are buying into has staying power.

Scarlett, of Clivedale, says the developer’s contracts with hotels last for between 30 and 50 years and it works hard to learn the “corporate dialect” of each one. But Paul Tostevin, director of world research at Savills, says he has seen housing developments “change flags” when brands fade.

At the Bulgari Hotel and Residences in Knightsbridge, a huge portrait of Monica Vitti, the Italian actress, hangs on the wall, while a specially made film is screened in the private cinema with clips from movies from La Dolce Vita to Mission: Impossible II that feature Bulgari gems.

The company says the building is intended to evoke the “fun and the colour” of the jewellery brand, along with the “Italian love of life”. For all that, there is a lot of polished mahogany and black leather.

The Bulgari building at least has a distinctive style. Others blend into one: greyish-beige furniture, gold accessories, a lot of leather and marble, inset flatscreens (the Candys’ bid for uniqueness was a golf simulator).

This is perhaps part of the point, as the travelling wealthy seek a sense of safety, an atmosphere they can rely on. But within this growing niche of the housing sector there is intense competition.

“I don’t know how intricate they can make their marble finishing and how deep they can make their silky shag pile carpets. Every development has a slightly longer pool than the last one, everyone has to outdo the last one,” says Scarisbrick. “I simply don’t know where it all ends.”

 

How the skies became the last word in super-rich real estate, from home viewing via helicopter to people-carrying drones

By Zoe Dare Hall

The sheer drama of driving – let alone parking – in cities, along with a bigger push to be healthy and walk or cycle instead, is seeing super-rich buyers increasingly willing to forego off-street parking spaces with their multi-million pound mansions. But access to a private jet or helicopter, on the other hand, has never been more desirable – particularly when it comes to viewing properties. 

Private aircraft ownership is on the rise, driven by the US (New York is the private jet capital of the world, according to Knight Frank’s Wealth Report 2019, with nearly 67,000 flights taken in 2018 from Teterboro airport, 12 miles from Manhattan). 

The number of global billionaires is on the up too, and jet owners spend about 1% of their wealth on private aircrafts, with an average of $16.4m per plane, says Knight Frank. 

Travelling by private jet isn’t so much a status symbol as a matter of pure practicality, I am told by London agents who are increasingly seeing their clients buy from the skies. 

“Every minute counts. Ultra high net worth clients live much faster lifestyles and private travel allows them to fit in more activity – and of course do things in comfort and style,” says Camilla Dell, director of Black Brick buying agency. It’s the norm among London clients spending £20m or so on a country estate, she adds, to travel by helicopter rather than car. 

With Battersea the only place to land a helicopter in central London, a chopper only really comes in handy when viewing in the countryside. Oxfordshire-based buying agent Jess Simpson says her clients use private jets or helicopters all the time. 

“It might not be obvious, as they’ll use an airport near the property, then travel to the property by helicopter or car. But it’s a great time-saver and you see so much more from the air than the road,” she says. “Many buyers in the £20m+ market search a wide geographical area, so viewing by helicopter is the only way to cover the distance.”

In the south of France, getting to know the lie of the land from the air is commonplace among UHNW buyers. “It means no queuing, no delays, no fuss,” says Tim Swannie, director of the French buying agency Home Hunts, who says a helipad is on the shopping list of most of his wealthiest clients. He is marketing a five-bed house with a helipad in St Jean de L’Esterel, with views over the Bay of Cannes, for 9.85m euros.  

 

“One financier recently sent a friend to view six properties for him in one day, spread across the Riviera and Provence, so he chartered a helicopter,” says Swannie. When the buyer came to inspect in person, he landed his jet at Cannes private airport, saw the properties, snuck in lunch in a Provencal chateau, then was back in London by late afternoon. “The next day, he bought a villa in Cannes and a hunting domain near Aix-en-Provence,” says Swannie.

Some property owners even carry out luxury home renovations by private jet. “One couple were restoring a house on the French Riviera. They sent two planes loaded with antique furniture and art from Geneva and City Airport and we arranged the logistics in France,” says Swannie. 

As flying privately becomes more desirable among the wealthiest property buyers, so too are properties that offer places to land their helicopter – or borrow a plane. South Florida saw a 35% increase in private jet travel last year, according to ISG World’s Miami Report. 

In Miami, competition for UHNW buyers is fierce among the city’s super-prime, starchitect-designed schemes. One way to set yourself apart from the rest is to offer access to the skies.

At One Thousand Museum Residences, designed by the late architect Zara Hadid, developer Louis Birdman describes the need to offer an amenity that isn’t typically offered in Miami – and the answer is a private rooftop helipad. 

“There are virtually no private skyscrapers in the US that have such an amenity. We have buyers from Latin America, Europe and New York where transportation by helicopter is far more common and they have chosen to buy here for the convenience,” says Birdman. Residences start at $5.8m through One Sotheby’s International Realty

The Ritz-Carlton Residences, Miami Beach – priced from $2m for a two-bed condo to $40m+ for a 10,000 sq ft villa – offer Miami’s first navigable marine helipad on Biscayne Bay, enabling buyers to view the property by air, and residents to schedule helicopter shuttles through the concierge. 

“The helipad is a three-minute ride away by day yacht – then owners can get to and from the airport in just a few minutes, or take a trip to the Keys or the Bahamas,” says Ophir Sternberg, CEO and founding partner of Lionheart Capital, the resort’s developer. 

“We often see international or out of state buyers requesting helicopter tours, allowing them to view the layout of the surrounding neighbourhood and proximity to landmarks such as the airport, major highways, schools and the beach. It also allows buyers to see the project from a 360 degree vantage point,” Sternberg adds. 

And at the Turnberry Ocean Club on Miami’s Sunny Isles Beach – where residences cost $3m-$35m – buyers have priority access to the private jet facility at Opa-Locka Executive Airport, including aircraft maintenance and a full-service concierge. 

“It’s the only residential condominium development that provides a true private FBO (Fixed Base Operator) as an amenity to our buyers – and many people are purchasing directly from the skies via plane and helicopter sales tours,” says Bruce Weiner, Head of Fontainebleau Development. “Many of our residents would fly private regardless, so the access is an added benefit that allows them to land private, just minutes from home.” 

Meanwhile, in Greece, super-rich buyers island-hop by chopper. New luxury developments with private helipads include One & Only Kea Island – where two- to five-bed residences cost from €3m-€7m – and Amanzoe in Porto Heli – whose turnkey villas on one- to five-acre plots cost from €3.2m for two bedrooms – both schemes through Sotheby’s Realty. 

“We have flown clients by private jet to Athens and then taken a helicopter to Amanzoe for a 24 hour viewing experience,” comments Guy Bradshaw, director at UK Sotheby’s International. 

Developers in Dubai have taken private aviation for property buyers one step further. Bradshaw reports that Omniyat, developers of The Dorchester Collection Residences in downtown Dubai, where two-bed residences start at around £3.1m, have partnered with Aston Martin to create the first people-carrying drones. 

Satisfying the UHNWI’s need for speed and one-off experiences, these futuristic, self-driving machines are surely a marketing tool no super-prime scheme – with enough space to land – should be without. 

2020: London’s golden year?

Since the UK election, excitement about a market surge has been palpable. But who will benefit and who will lose? 

By Nathan Brooker.

Since the UK election, excitement has been palpable. But there are still turbulent times ahead.

Simon Rowell is thrilled with his new purchase. Last week, he picked up the keys to a two-bedroom flat near Clapham Junction station in south-west London, which he intends to rent out for about £2,500 a month. “I’m one of the dying breed of private buy-to-let investors,” he says.

Rowell, creative director for Bannenberg & Rowell, a superyacht-design company, predicts the London property market will pick up this year, so he has snapped up what he thinks will be a good investment before it is too late. The flat cost £700,000 — just £2,000 more than its sale price in January 2017, when it was new.  “That represents completely flat asset appreciation from the seller’s point of view,” he says. “I reckon that doesn’t last very long in London.” 

Many property agents agree. Since the Conservative party won the general election in December, some have barely been able to contain their excitement at the prospect of a 2020 surge in prices and transactions in the UK capital.

“I went from despair to elation in a matter of hours when the results were announced,” says Trevor Abrahmsohn of agents Glentree Estates, which specialises in homes for wealthy buyers. “This could be a golden year.” 

Agents are confident partly because the Conservative majority in parliament has released the Brexit logjam, but mostly because the Labour party, led by Jeremy Corbyn, did not win. Most agents were convinced that a Labour government would have targeted the UK’s luxury property market, with wide-ranging reforms to taxation and changes to laws for landlords. 

Now, UK house prices are expected to rise in 2020. Savills is predicting 1 per cent growth; Strutt & Parker says 4 per cent. Camilla Dell of buying agents Black Brick thinks these forecasts are too conservative. She says prices for London’s best luxury homes could rise 10 per cent in 2020.

“The attitude of sellers has already changed,” says Dell. “They have become much more confident and are likely to take a much firmer line on offers.”

The optimists were buoyed last week when Cheung Chung-kiu, the Chinese property magnate, agreed to pay more than £200m for a mansion on Rutland Gate in Knightsbridge, a price that makes the property the most expensive sold in the UK.  If agents’ predictions are right, which category of buyers stands to benefit — and which stands to lose — from a London property market surge? The FT asked experts and buyers what could happen over the next 12 months. 

Luxury estate agents have described the record-breaking Rutland Gate sale as evidence that London’s prime property market is recovering — and holds its appeal — after years of falling prices and low sales figures.

“A big sale like that is emblematic of the turn in fortunes that we have seen in the market since the election,” says Liam Bailey, global head of research at Knight Frank. He says the number of exchanges his agency dealt with in prime central London in December was the second-highest monthly total since April 2014, when the market was booming.

Marc von Grundherr, a director at Benham and Reeves, which specialises in selling London property to overseas investors, sets the scene: “After the election, we had people who I hadn’t spoken to in a couple of years ringing up, saying: ‘Marc, let’s really look now — what can I buy?’” In the past four weeks, von Grundherr estimates that 200 of his clients called in to their offices worldwide, interested in buying London property. 

Overseas buyers should find lower prices than in recent years — especially if they are US dollar buyers. According to Savills, the average price in prime central London has fallen by about 21 per cent since its peak in 2014. Once the currency exchange is factored in, dollar buyers today reap a discount of 38 per cent compared with five years ago.

They may soon get even more than that. Data published this week show the UK economy contracted by more than expected in November, adding pressure on the Bank of England to lower interest rates.  While worsening economic conditions may not be good news for domestic buyers, the prospect of a rate cut sent the pound below $1.30 on Monday — and the weakened pound has attracted overseas buyers in search of a bargain. 

But while some agents assume the recent flurry of prime London sales is an indication of renewed confidence, Neal Hudson, an analyst, says the uptick could be short-lived. He thinks that many of these buyers are from overseas and would have bought anyway, but are speeding through their purchase to beat an additional 3 per cent premium on foreign sales that was outlined in the Conservative manifesto. 

“I suspect people will keep a close eye on when that policy is likely to be announced,” he says. What will happen after it is brought in? “The [prime] market will probably tank and we’ll go back to continued whingeing about high rates of stamp duty and people wanting it cut to get the market moving again,” he says.

“First-time-buyer numbers have been fairly static in London for the past few years, and that’s likely to continue,” says Hudson. “The problem is that house prices are still far too expensive for all but the luckiest of the lucky.” 

Growing wages and falling prices have improved affordability, but not by enough. According to Nationwide, the average price for a first home in the capital was more than £401,000 at the end of 2019 — down from more than £419,000 at the beginning of 2018, but still 8.8 times the average London salary.  The most unaffordable period for first-time buyers was the middle of 2016, when the average property was 10.2 times the average salary.

High prices have led many people to take advantage of the government’s Help to Buy scheme, which offers buyers of newly built homes an equity loan of 40 per cent in London. The scheme, set up in 2013, has supported more than 210,000 sales in England, but from next year it will be restricted to first-time buyers before it ends in 2023.

Or, at least, that is the plan. Many property experts argue that it will be difficult for the government to wean the market off Help to Buy, and the scheme will either be extended or another will take its place. The Conservative manifesto said the government “will review new ways to support home ownership” after Help to Buy is withdrawn.  It also mentions “encouraging” a market for long-term fixed-rate mortgages, which could help reduce the size of the deposit that first-timers need.

Rosie Smith, 34, who works for one of the Big Four accounting firms, has been looking for the right two-bedroom apartment in north London for several months. She has decided against using Help to Buy. “I very quickly decided not to do that when I realised how much more expensive the homes are,” she says.  In October, research from Reallymoving, a price-comparison site for conveyancers and surveyors, calculated that first-time buyers using Help to Buy in London paid about 12 per cent more compared with those who bought new homes outside the scheme. 

“[Our] research indicates that the attractiveness is enabling developers to charge more for homes with Help to Buy available and encouraging first-time buyers to pay over the odds,” the company says. The so-called premium comes on top of the already hefty premium new-build homes command over second-hand properties — and neither can be passed on when it is time to sell.

Smith is now looking for a two-bedroom flat in Islington or Haringey for about £450,000. “I’m in no real rush to move,” she says, “but I have lived in the same place now for seven years, and in that time, I have spent £70,000 on rent. I’d rather be paying off a mortgage.”

In August, Rebecca Stott set up Found It London, a buying agency specialising in first-time buyers. She predicts circumstances will improve this year. “Their main problem has been that there is just not enough stock on the market,” she says. A more positive market sentiment could lead to more homes up for sale. 

Furthermore, changes to stamp duty for overseas buyers (as outlined in the Conservative manifesto) and the complete withdrawal of tax relief for landlords (which will come into force in April) will mean first-time buyers face less competition.

“There are always opportunities out there,” says Stott. “You just have to look for where the pockets of value are.” Stott recommends hunting in areas a little further away from Tube stations, for example, and — while this is not always easy — picking the right sellers.  “People selling now who bought three or four years ago are struggling to get the price they paid. But find the people who bought 10 or 15 years ago [and] there’s your opportunity.”

Government policy tends to focus on helping first-time buyers, which means those hoping to trade up to a bigger property are often overlooked — and there is little in the Conservative manifesto to suggest this will change. 

“Second-steppers are a largely forgotten segment of the housing market,” says Lucian Cook, director of residential research at Savills. “In London especially, their numbers have got pretty low.”

According to data from UK Finance, in the year to September there were 26,780 mortgaged movers in London — people who already have a mortgage moving to another property. That figure is more than 18 per cent lower than the 10-year average.  The decline in mortgaged movers is a national phenomenon. According to data from Zoopla, in 1988 the average UK household moved once every 8.63 years; in 2017, people moved once every 23 years — and in London, once every 26.5 years.

London’s second-steppers have been held up by the widening gap between the prices of flats and houses. In October, the average gap between a flat and a terrace house in London was £94,000, according to Land Registry data. In October 2009, it was just £30,000.

Mortgage regulation has made it harder to trade up, says Cook. Currently, regulation limits lenders and stress-tests applicants’ affordability. “A lot of people are sitting on a pretty decent pile of equity but are unable to bridge the gap to the next step on the ladder,” he adds. 

While the Conservative manifesto mentioned encouraging a new market for long-term mortgages to help first-time buyers, it is not clear if they want to relax the amount a person can borrow as a multiple of their salary — which is what ultimately limits second-steppers. And at this point, it is too early to tell if regulations will be relaxed when Andrew Bailey takes up his role as the new governor of the Bank of England in March.

“For most second-steppers, it is their need for more space that underpins their need to trade up,” says Cook, “and so many are going to have to relocate to cheaper markets — either cheaper places within London, or by moving out to the commuter belt.”

Gabriel Ng, a 27-year-old software developer, moved his young family from a two-bedroom flat in Barking to a four-bedroom house in London Square, a new development in Orpington, on the outskirts of south-east London. “We wanted a bigger home and better amenities close by,” he says. 

Life will be tough for buy-to-let investors in 2020. According to research by Richard Donnell, director of research at Zoopla, the number of mortgaged investors buying in London is down more than 60 per cent compared with 2015.

“Everybody is having to adjust to a completely new landscape,” he says. In 2016, the government made it more expensive to buy rental homes by adding a 3 per cent stamp-duty premium to the purchase of additional properties. In 2017, it started withdrawing the tax relief that landlords could claim back.  Before then, UK taxpayers renting out a property with a buy-to-let mortgage could deduct all mortgage interest payments from their tax bill, meaning they only had to pay tax on profits, not turnover. Because many landlords opted for interest-only mortgages, that was a substantial saving.  But from 2017, that relief was phased out by the previous Conservative government until April this year, when they will not be able to deduct anything.

Meanwhile, slowing house-price growth has reduced the potential for capital appreciation, and many fear the long-term impact of Brexit could affect rents if fewer companies and workers are attracted to the UK.

Donnell has compared the business case that investors would have faced in 2016 with today. Then, the average amount spent on a rental property in London was £437,000 with a gross yield of 4.3 per cent.  A lot of people are sitting on a pretty decent pile of equity but are unable to bridge the gap to the next step on the ladder Lucian Cook, director of residential research at Savills But at that time, if investors had assumed rents would have risen 3 per cent per year, and house prices would have risen 5 per cent (in 2016, they actually rose about 10 per cent, so 5 per cent would have felt pretty conservative), then they could have calculated their internal rate of return (IRR) at 7 per cent over 20 years. 

Today prices are higher, with an average spend of £476,000, and yields are a little higher at 4.4 per cent, but with more modest predictions for house price and rental growth (about 2.5 per cent per annum for both) then their IRR falls to 4.8 per cent over 20 years. “This drop in return explains why we’re seeing a drop in investors buying in London,” says Donnell.

The outlook for rental returns outside London are better — Donnell calculates the IRR in the north-west of England to be 8 per cent, for example. Nevertheless, London retains its appeal: “If you want strength and stability of cash flow, then of anywhere in the UK, London is still the best place to get it,” says Donnell. 

“In the analysis we have just done, the average rent in London is £1,800 per month; in Manchester, the typical investor is only getting £720.”  

A government survey released this month found 45 per cent of landlords in England have only one investment property, and 44 per cent became landlords to contribute to their pension.

“What does every pension investor want? An asset that performs in line with earnings growth because that is what they’re losing when they retire,” says Donnell.

Sometimes, real life — rather than mere market sentiment — brings an overriding reason to buy a home. For Rowell, the landlord who has just bought a flat near Clapham Junction, the potential for his family to use the property in the future was a big draw. 

“We have got teenagers,” he says. “On the basis that our kids hopefully will be young professionals themselves one day, this property gives us lots of options.” 

Where to buy in London: the fast-changing areas for home buyers to have on their radar in 2020

10 London areas for home buyers to consider in 2020 – and why

Buyers looking to start the 2020s in a new London home face big decisions, the first being how close to the centre of the capital they need to be. But if the answer is “very”, the options don’t necessarily have to be limited.

Factors such as a history of good price growth — but with room to grow in the future — and regeneration potential are as important as the quality of local housing stock, the range of transport links and local amenities.

As the new decade gets under way Homes & Property shares its tips for London locations which appear to tick all the boxes.

Brentford, west London

One of the capital’s many industrial backwaters getting a much-needed makeover, Brentford is the west London hotspot you can afford.

Thousands of new homes are under construction overlooking the area’s three waterways – the Thames, the River Brent and Grand Union Canal – bringing with them new shops, restaurants and cultural and sporting facilities.

These new homes are augmenting the area’s existing stock of period houses, and although out in Zone 4 Brentford’s transport links are fast – trains to Waterloo station take just over half an hour.

Most local schools hold at least a “good” Ofsted report and Lionel Primary School and Gunnersbury Catholic School (seniors) are both considered “outstanding” by the schools’ watchdog.

The Brentford Project is set to bring 900 new homes, an arts centre and cinema.

Why Brentford is tipped as one to watch in 2020

The smart money gets in early in the regeneration process for maximum uplift. Ballymore launched the first homes at its 12-acre site by the River Brent in September, with “exciting announcements” expected this year on the shops due to move into a rejuvenated high street.

The Brentford Project will eventually include almost 900 homes, plus facilities including a leisure centre, and an arts centre and cinema. Prices start at £442,500 for a one-bedroom flat; two-bedroom flats are priced from £652,000. Visit thebrentfordproject.com.

Ballymore is not alone in scenting potential in this town. Brentford Football Club’s home is getting a new stadium plus new homes, and another 700 or so homes are coming at Brentford Lock West (brentfordlockwest.co.uk) beside the Grand Union Canal.

The pros: proximity to the lovely Syon and Gunnersbury Parks.

The cons: regeneration comes at a price. Boat owners at the moorings at Waterman’s Park have been moved on to make way for a new marina. The High Street is basic and marred by empty shops. Motorway noise from the M4 blights some streets on the north side of Brentford.

Average house prices in Brentford ​— and what there is to buy

Average prices in TW8 have topped the £500,000 barrier, at £511,000 according to Rightmove. Five years ago the average price was just £376,000.

There’s not a huge number of houses in this area, which pushes up prices. A two- to three-bedroom period terrace house will cost around £550,000 to £650,000.

Flats are in plentiful supply and the new homes landing in the area have also pushed average prices upwards. Buyers have a good choice of newish two-bedroom flats – and the odd period conversion – for around £450,000 to £500,000.

More dated purpose-built two-bedroom flats have price tags closer to £300,000.​

Poplar, east London

Makeover: the transformation of ChrispStreet Market is part of the multibillion-pound Poplar regeneration.

Its location just north of Canary Wharf means this former Victorian slum has long been ripe for regeneration.

Now, finally, Call the Midwife country is being reinvented for the 21st century. In the pipeline are some 3,000 flats – in new buildings and revived brutalist landmarks – plus shops, offices and new parks.

There are also a few streets of period houses for families in search of a traditional home, while one of the area’s four primary schools gets an “outstanding” report.

For older children, Langdon Park Community School is rated “good”. Poplar is served by several Docklands Light Railway stations, all Zone 2.

Why Poplar is tipped as one to watch in 2020

A hugely symbolic year is in prospect for this ugly duckling of the East End as residents move back into the newly restored Balfron Tower.

The brutalist Sixties landmark designed as social housing by Ernő Goldfinger (of Notting Hill’s Trellick Tower fame), has been rebooted as upscale apartments. One-bedroom flats start at £365,000. Visit balfrontower.co.uk.

The pros: much more affordable than Canary Wharf. Lots of change on the cards. The old-school Chrisp Street Market is in line for a £280 million redevelopment with apartments and a new market, despite existing traders claiming they could be pushed out of the area. As well as stalls, there will be space for one-off events such as live music, ice rinks, vintage fairs and open-air screenings.

Regeneration of the sprawling Aberfeldy Estate, renamed Aberfeldy Village, is well under way, with more than 1,000 homes plus shops, a gym and a linear park, completing by around 2025. The High Street has a reasonable selection of useful shops, and there is green space in the form of Bartlett Park and Poplar Recreation Ground.

The cons: for all the billions of pounds being spent, Poplar is still rough and ready. The architectural Marmite that was the Robin Hood Gardens estate has been lost to redevelopment despite huge opposition to its demolition from leading architects. Critics say locals are hopelessly priced out of all the shiny new apartments springing up.

Average house prices in Poplar ​— and what there is to buy

Poplar shares a postcode with Canary Wharf and the Isle of Dogs, and the average price in E14 is £512,000 up a respectable 15 per cent in the past five years.

In Poplar a budget of £500,000 will buy a one-bedroom flat at Orchard Wharf by Galliard Homes, with the added benefit of a communal roof terrace with amazing views.

You could equally buy a more dated two-bedroom purpose-built flat, or a two- to three-bedroom period terrace house – although the challenge here will be finding one.

Woolwich, south-east London

Berkeley Homes’ multibillion-pound regeneration of the Woolwich Arsenal features 5,000 new homes (Daniel Lynch).

 

Five miles down the Thames from Canary Wharf, Woolwich is shaping up as a real alternative, with Berkeley Homes’ multibillion-pound regeneration of the Woolwich Arsenal, featuring 5,000 new homes plus bars and restaurants revamping the waterfront, and Crossrail due to upgrade transport links in 2021.

Down the line, British Land is planning a five-acre mixed development on inland Woolwich’s grotty high street, while Greenwich council has pledged £40 million to repurpose a series of historic buildings on the waterfront into arts and cultural venues.

A former ammunitions factory will become a performance venue with seating for more than 4,000 people.

Transport is provided by DLR (Zone 4), and schools include the Ofsted “outstanding” St Peter’s Catholic Primary School and Cardwell Primary School.

Why Woolwich is tipped as one to watch in 2020

Of all London’s regeneration zones, CBRE tips Woolwich to enjoy the biggest “regeneration house price growth premium” – 7.6 per cent per year.

The pros: the river. Plenty of green space, in the shape of Oxleas Wood and Plumstead Common.

The cons: Woolwich’s waterfront flats are expensive, and the streets of period homes further inland have a rather bedraggled air. Local council estates are downright scruffy.

Average house prices in Woolwich ​— and what there is to buy

An average home in SE18 costs £481,000, according to Rightmove, up from £272,000 five years ago – a massive 77 per cent.

These average figures hide a massive range of homes. Berkeley Homes is currently selling a splendid two-bedroom duplex at Royal Arsenal Riverside for £1.3 million. But you can buy a two-bedroom flat at the site from £600,000.

In the town centre you could pick up a four-bedroom period house for between around £550,000 and £600,000.

Prices for apartments drop the further from the river you move. A two-bedroom flat would cost between around £350,000 and £400,000, or less for ex-local authority property.

Bayswater, west London

Whiteleys shopping centre is being redesigned with new shops and restaurants, along with luxury new homes.

 

Historically, Bayswater has been the shabbiest but also the least expensive of the neighbourhoods encircling Hyde Park.

Its shops may lack excitement but its Zone 1 location is brilliant, its unconverted townhouses are elegant and, most importantly, regeneration is gathering pace.

You can walk to the West End or hop on the Central line at Queensway station or the District and Circle from Bayswater. From 2021 a short walk to Paddington will be rewarded by Crossrail services direct to the City or Canary Wharf.

“With its neighbour Notting Hill to the west and Marylebone to the east, where values can easily exceed £3,000 per square foot, Bayswater has long been the forgotten area of prime central London,” says buying agent Caspar Harvard-Walls, partner at Black Brick.

The reason for Bayswater’s Cinderella status? “Bayswater is blighted by Queensway, which is dominated by fast-food takeaways and mobile phone shops.”

Why Bayswater is tipped as one to watch in 2020

The clean-up of Bayswater is already clear. The first homes at the landmark Grade II-listed former Whiteleys shopping centre, which closed in 2018, go on sale this year. Prices are still to be confirmed and if you need to ask, you probably can’t afford one.

There will also be shops and restaurants at the redesigned centre, rebooted by starchitect Norman Foster. Meanwhile, a cluster of smaller developments on and around Queensway will have more flats, shops and offices  that will generally smarten up the street.

The pros: Bayswater is relatively underpriced for its prime location, and Crossrail and regeneration will produce price growth.

“We know the effect that improving the public realm has on property values,” says Harvard-Walls. “The redevelopment of Marylebone High Street, Mount Street in Mayfair and Sloane Square in Chelsea have led to surges in the price per square foot in those areas. We expect 2020 to be the year the wider market really starts to sit up and take notice of Bayswater.”

The cons: it is good value for prime London, but it’s still not cheap. And there are still too many shabby two-star hotels.

Average house prices in Bayswater ​— and what there is to buy

An average home in W2 costs £1.25 million, according to Rightmove. Unlike other prime districts, where prices have flopped 20 per cent in the past two years, values are up slightly, from £1.2 million five years ago.

White stucco townhouses, often divided into flats, could again become the area’s loveliest homes, priced at £1,500 to £1,600 per square foot for a modernised property.

Prices for newer purpose-built flats are considerably more affordable at about £1,000 per square foot.

Goodmayes, on the fringes of London and Essex

Game-changer: Weston Homes is planning a major development of almost 1,300 new homes.

 

Right on the fringes of London and Essex, Goodmayes has got a quiet and leafy suburban feel and the kind of quality Edwardian housing which would be totally unaffordable if it was a little closer to central London.

Nobody could claim it is a chichi urban village, but this multicultural neighbourhood has both transport improvements and big investment on the horizon, making it one to watch.

It’s already a good option for people working in the City because of its 23-minute rail links to Liverpool Street, with the annual cost for a season ticket £1,400.

Goodmayes Primary School and Mayespark Primary School are rated “good” by Ofsted. For seniors the closest option is Chadwell Heath Academy, which has an “outstanding” Ofsted report and excellent GCSE results, even though half its pupils don’t have English as their first language.

Why Goodmayes is tipped as one to watch in 2020

Goodmayes will be on the Crossrail line, with direct services to the West End and west London on the cards in 2021.

Weston Homes is planning a major development of almost 1,300 new homes on a site currently occupied by a Tesco superstore, of which a third will be affordable and aimed at first-time buyers. There will also be a new primary school, shops and cafes, and landscaped grounds. A decision on the planning application is expected this year and could be a game changer for the area.

The pros: lots of bang for your property buck. Goodmayes Park has got a lake, basketball and tennis courts.

The cons: there’s nothing really wrong with it, but Goodmayes lacks a heart: traffic-clogged Goodmayes Road, while perfectly serviceable as an everyday high street, doesn’t provide one.

Average house prices in Goodmayes ​— and what there is to buy

Average prices in RM6 stand at £364,000, up from £263,000 five years ago – an increase of almost 40 per cent.

As yet there aren’t many flats in the area but it is a good hunting ground for houses. A four-bedroom terrace house would cost anywhere between £650,000 to £800,000.

A three-bedroom Thirties semi would cost around £400,000 to 450,000.

Blackhorse Road, north-east London

Blackhorse Road has good Zone 3 transport links, with the Victoria line and London Overground (Alamy Stock Photo).

Waltham Forest is one of London’s best-performing boroughs of the past 10 years, and this unassuming swathe of workers’ cottages, old factories and workshops is starting to emerge as a real alternative to trendy Walthamstow.

The council’s masterplan for Blackhorse Road is not only to oversee the creation of 2,500 new homes – developers are rushing to invest – but also to attract a new generation of makers, designers, artists and start-up entrepreneurs to breathe life into the area. To this end, the authority is insisting that new developments include workspaces and studios.

Blackhorse Road already possesses good Zone 3 transport links, with the Victoria line and London Overground. Schools include Hillyfield Primary Academy and St Patrick’s Primary Academy, which both hold “good” Ofsted reports, and Eden Girls’ School Waltham Forest (seniors), rated “outstanding” by the schools watchdog.

Why Blackhorse Road is tipped as one to watch in 2020

Blackhorse Road is changing, swiftly and for the better. Barratt London, London & Quadrant and Transport for London started work last summer on Blackhorse View, with 350 new homes of which half will be affordable and aimed at first-time buyers, plus 17,000sq ft of shops and workspace to a design by RMA Architects.

Design standards are generally looking high across Blackhorse Road: housing associations Catalyst and Swan are using CF Møller, the firm which designed phase two of the Darwin Centre at the Natural History Museum, to build 330 lower-cost homes on the former Webbs Industrial Estate.

The pros: Walthamstow Wetlands, London’s fantastic new nature reserve created around a series of Victorian reservoirs, is just to the west of Blackhorse Road.

The cons: a lack of much to do in terms of shops, bars and restaurants.

Average house prices in Blackhorse Road ​— and what there is to buy

Blackhorse Road is in E17 where average prices stand at £484,000 according to Rightmove, up from £378,000 five years ago.

The streets around Blackhorse Road Tube station are lined with neat terrace houses, originally built for local factory workers. A three-bedroom house would cost £500,000 to £550,000.

At Taylor Wimpey’s Eclipse development (taylorwimpey.co.uk) buyers could opt for a new flat, priced from £329,000 for a studio and with London Help to Buy available.

Mitcham, south London

Mitcham Common is bigger than Hyde Park, offering 460 acres of green space which stretches from the town centre to the edge of Croydon.

 

Pleasant, leafy and – to be brutally honest – rather dull, this outpost of south London is nevertheless a safe option for first-time buyers and families alike.

Its popularity stems from its affordability and good transport links. It is also earmarked for serious investment in new homes and new facilities to replace run-down council estates.

Trains from Zone 3 Mitcham Eastfields and Zone 4 Mitcham Junction will get you to Victoria in around 20 minutes, or Blackfriars in less than half an hour.

Local primary schools get an almost clean sweep of “good” reports from Ofsted, and there is a very large choice. For seniors, Harris Academy Morden is considered “outstanding” by the schools watchdog.

Why Mitcham is tipped as one to watch in 2020

Housing association Clarion is leading the £1.3 billion regeneration of three shabby post-war former council estates in the area, providing 2,800 new homes for council tenants, shared owners, renters and for private sale. There will also be new shops, leisure facilities and open spaces

The pros: the 460-acre Mitcham Common is bigger than Hyde Park.

The cons: the town centre is a boring backwater badly in need of investment. Merton council is actively seeking a developer to breathe new life into it.

Average house prices in Mitcham ​— and what there is to buy

Buyers are moving to Mitcham from more expensive areas including Streatham and Tooting. The average price in CR4 is £394,000, up from £281,000 five years ago according to Rightmove, a paper profit of well over £110,000.

For families a three- to four-bedroom terrace house, either Thirties or Victorian and in good condition, would cost £500,000 to £650,000. The closer to Peckham the higher the price.

There are also maisonettes priced £300,000 to £350,000 for a two-bedroom property.

At Redrow’s Millfields development (redrow.co.uk) fans of new homes could pick up a three-bedroom townhouse by the River Wandle and set in landscaped gardens, from £580,000. London Help to Buy is available.

Prime property predictions 2020: Europe, the Middle East and Africa

There is light at the end of the Brexit tunnel in the UK and investment openings in the Gulf and Africa

Berlin is one of the top-tier eurozone cities that has seen strong price growth

By FT Residential

In the first of our series of property predictions for 2020, industry experts give their views on what to expect from residential markets in Europe, the Middle East and Africa over the next 12 months.

Liam Bailey, global head of research, Knight Frank

Our prediction in 2018 that the top-tier eurozone cities would outperform in 2019 has come to pass. Berlin, Madrid and Paris continue to sit high in the Knight Frank Prime Global Cities Index. Relative economic stability, low interest rates, limited new supply, and strong tenant and second-home demand are underpinning price growth.

What failed to materialise was the rising cost of finance we predicted. Instead, a slowing global economy has led to looser monetary policy: economic stimulus measures remain or have even been enhanced, with the European Central Bank restarting quantitative easing on November 1. This has eased affordability pressures in the mainstream market and at the prime end.

We expect the low-rate environment to persist in 2020 but, despite this, for luxury price growth to remain muted as the headwinds mount. From the interminably tedious Brexit negotiations to the US-China trade tensions, Hong Kong protests and US presidential election, the level of uncertainty has ramped up a gear in the past year.

Although European policymakers are likely to steer clear of major interventions as seen in other parts of the world, including foreign buyer taxes and bans, we expect greater regulation of the holiday home rental market in those cities that attract a high volume of tourists.

Camilla Dell, managing partner, Black Brick Property Solutions

The decisive Conservative victory in December’s UK general election will resolve much of the immediate Brexit uncertainty and restore confidence, especially regarding property taxation.

We predict the Conservative win will result in UK sellers hardening their positions, causing prices to rise this year — there is significant pent-up demand. In the final quarter of 2019, we registered twice as many applicants compared with the same period in 2018. The average budget per applicant also rose, from £4m to £6.35m.

While the Conservatives have pledged to bring in a 3 per cent stamp duty increase for overseas buyers, we predict this will be absorbed by the market, as previous rises have been. Most overseas buyers are far more concerned about an annual property tax, which is not part of the Conservative manifesto. We are also likely to see a rush of deals exchanging ahead of any stamp duty change.

Although the Brexit process has tarnished the UK’s reputation for sound governance, this should be put in context. As we found throughout 2019, London remains a (comparative) beacon of stability and rule of law, compared with much of the Middle East and Africa and, latterly, places such as Hong Kong. Despite tax rises in recent years, analysis by Savills found London is ranked 12th out of 17 global cities in terms of overall costs of buying, owning and selling prime property.

Hugo Thistlethwayte, head of global residential operations, Savills

In the United Arab Emirates, a combination of new government policies and major investment is set to change residential markets. In Dubai, the government has set up a real estate committee to address concerns such as oversupply, and 2020 will see developers focus on completion and handover of ongoing projects.

A Dh50bn ($13.6bn) fund in Abu Dhabi will boost the development of small and medium-sized businesses, research and development, and eco-tourism alongside a significant infrastructure spend. This should cascade into the local economy, although there may be a short lag for this to trickle into real estate capital values.

Freehold legislation changes announced in 2019 have helped create an investment-friendly legal framework and, as prices begin to bottom out, will herald a more stable, less cyclical and therefore more sophisticated market.

A growing population in Sharjah is driving demand in an area coined Emerging Sharjah. Inquiry levels rose 50 per cent between the first and second quarters of 2019 and this is expected to continue into 2020.

Residential values in Egypt have stabilised after a few years of rapid price growth. Underlying fundamentals are still strong as supply fails to keep pace with a large, rapidly expanding population, although affordability is a concern. A potential oversupply at the top end of the market means there is a move towards building smaller, more affordable units. Branded residences are a growing trend that is expected to increase the appeal of Egyptian property to international buyers.

Saudi Arabia’s opening-up to international investment is unprecedented and may provide an opportunity for pioneering foreign buyers.

Henry Pryor, high-end buying agent

The world is perhaps a more uncertain place as we look forward to 2020. I was, on reflection, perhaps not cautious enough in my predictions for the past 12 months. It is easy to be optimistic at New Year.

Africa may hold the biggest potential in the next year as Asian investors continue to pour money into many parts of the continent. Russian and Middle Eastern buyers are also looking to build on commodity interests in Africa and it seems like a period of stability is overdue, which may bolster confidence in some countries.

Money is still drawn to the Middle East like a moth to the flame, but more cautious investors are sensing the time has come to move on. Braver, or perhaps more naive, investors remain, but risks appear to outweigh possible rewards for all but a handful.

Europe retains its triple-A rating for most property investors and a lot of speculators. Not without risk, the region remains popular and relatively safe. Some parts along the eastern flank (Croatia, Albania and Montenegro) are drawing in speculators, but real money still loves the traditional markets such as London, Paris and Rome, despite higher buying and holding costs. Look along the east coast of the Adriatic in 2020 for the biggest bets to be made.

Yolande Barnes, professor of real estate, The Bartlett Real Estate Institute, University College London

This year will be when the great asset price inflation of the late 20th and early 21st century is complete in many Emea real estate markets. There are still a few opportunities in emerging markets and growing cities to ride the last waves of asset price growth, but the aim of real estate investing is moving towards income generation rather than capital trading.

Real estate buyers will increasingly look at the amenity value and cash flow implications of owning, and this applies to residential owner-occupiers as much as commercial institutions.

Prime markets in the UK, particularly London, have already seen the last of the very high rates of growth, which many commentators think is normal and owners have come to expect over the past 60 years. The postwar inflation era is long over and the dramatic falls in interest rates or yield shift that have driven all sorts of asset prices upwards since the 1990s has ended.

Future growth in real estate prices will depend, as it did in previous centuries, on occupier fundamentals; that is, drivers of rental value such as household income, demand and supply — rather than speculation and investment. The question is not how the market is moving but how individual assets are performing: is value being added? Is the productivity of a piece of land being increased?

This is the year when we will start to recognise that some so-called assets can also be liabilities. Successful owners in future decades will be the ones who can tell the difference.

What does selling off market mean?

There are clear signs that “private” sales are going mainstream

By Melissa York

Pssst… are you “off-market”? No, I don’t mean married — is your house on a secret list of properties for sale? Though this practice sounds clandestine, all it means is that you’ve chosen to keep your house out of the public domain, away from browsing eyes on Rightmove and Zoopla and out of high-street windows. Instead, estate agents trade these homes among themselves, matching them with the requirements of registered off-market buyers.

While buying and selling this way isn’t new, there are clear signs that “private” sales are going mainstream. Once the exclusive preserve of oligarchs and celebrities who didn’t want the contents of their home splashed all over the internet, the practice has moved further down the market in recent years.

“We used to be dealing in £20m properties, but now it can be anything from £1m upwards,” says Caspar Harvard-Walls, partner at the buying agency Black Brick. He estimates that the number of off-market properties on his books has risen from a quarter in 2018 to a third in 2019.

“I was looking on behalf of a buyer who had a £4m budget. I found six houses that met their specific brief and not one of them was on the open market.”

And this phenomenon isn’t limited to the chattering classes in the capital. Agents at Carter Jonas in York have also noticed an increase in off-market sales in the middle market, up from 10% of listings to 15% over the past year.

While there are many personal reasons one might go off-market — security for starters, as you will discover in my feature — the internet has played a significant role. Selling your home is just a lot more public than it once was. Now any buyer can see how long your home has been on the market, how much you bought it for and the value of similar homes in your street at the click of a button and a scroll of a mouse.

In 2018, 26% of homes on Rightmove, the UK’s biggest property portal, sat unsold for more than six months. If a buyer sees this, they will start to think it isn’t selling because there’s something wrong with it and will sniff a discount in the offing. Properties that have had a price reduction on the open market are also doomed to a similar fate. Those kept off-market, on the other hand, retain a certain mystique.

In an uncertain time, perhaps it is smart that buyers are testing the water in this way, rather than hanging their dirty discounts out for everyone to see. Maybe this trend isn’t clever at all, but merely a sign of the times. Harvard-Walls links the rise in estate agents leaving big firms to set up on their own as independents to this trend. Like artisan coffee, craft gin and boutique hotels, perhaps going off-market with a buying agent simply seems like a rarefied, fashionable way to sell your house these days.

Speaking of hipsters, new research from Jackson-Stops has revealed an unusual penchant for high ceilings among millennials. The estate agency conducted a survey asking more than 2,000 UK adults to name their favourite architectural period features (niche, I admit). Lofty ceilings ranked fourth, with 28% picking them, behind bay windows (38%), grand open fireplaces (37%) and a country-style kitchen (29%).

However, when only 18- to 34-year-olds were included, high ceilings came out on top, with more than a third (36%) saying it was their most desirable period feature. Londoners were also especially keen on raising the roof (35%). Perhaps this isn’t such a mystery when you consider the cramped conditions in many new-build high-rise flats — the only option young people have in the capital if they want to purchase their first home using Help to Buy. A head-banging conundrum if ever there was one.

 

London house prices: asking prices dip despite low supply as sellers hold putting their homes on the market until after the General Election

Listings of London homes for sale plummet as the nation waits to see who’ll be in power after December 12th

By Ruth Bloomfield

Londoners thinking of selling their homes appear to be postponing their decision until after the result is known of the General Election on December 12.

The number of homes put on sale during this month is down by a resounding 26.9 per cent compared to new listings in November last year, research by Rightmove shows.

Rightmove blames a powerful triple-whammy of political uncertainty, Brexit and the traditional seasonal slowdown.

”Our monthly poll of the housing market shows a clear swing towards hesitation for prospective sellers, with buyers losing the extra choice that thousands more newly marketed properties would bring,” says Miles Shipside, Rightmove’s housing market analyst.

Sales numbers are also falling – although only slightly, as London buyers take advantage of asking prices down by 1.4 per cent – or £8,926 – in the last month. Across the UK asking prices fell 1.3 per cent in the same period and are unlikely to revive until the New Year at least.

“Near-term uncertainty will exacerbate the traditional lull in activity in the run-up to Christmas,” predicts buying agent Camilla Dell, managing director of buying agents Black Brick.

“This lull can present an ideal opportunity for buyers to strike. With only seven weeks to go before Christmas, vendors can become desperate to close a deal, and other buyers may be distracted with their festive preparations. Our view is that this can be the best moment to strike.”

Walter Mythen, a director at estate agents JOHNS&CO, agrees. “There has never been a better time to negotiate a good deal,” he says. “Within reason, many developers and individual sellers are open to fair offers so it’s always worth asking.”

Rightmove’s November house price index found that the average property in the capital now has a price tag of £609,506. The asking price for a home in Zone 1 stands at just over £1.3 million, but you could pick up a home in Zone 4, 5, or 6 for between £465,000 and £488,000.

The best-performing individual boroughs over the past year have been in east London, led by Tower Hamlets, with asking prices up 3.5 per cent to an average of £592,000. Homes in Waltham Forest, Bexley, Hackney, and Havering also saw modest annual price growth, along with those in Southwark and Sutton.

But two thirds of the capital’s boroughs have seen prices decline in the past 12 months, led by three leafy south-west London boroughs: Richmond upon Thames (down 6.1 per cent), Kingston upon Thames (down 5.9 per cent), and Wandsworth (down 4.5 per cent).

In the longer term, Savills’ influential five-year house price forecasts, published this week, suggest that average prices in London will increase by four per cent by 2024, while prices in the South-East will leap by 10.9 per cent.

It believes that prime central London will lead the recovery, with price growth of 20.5 per cent over the next five years, cancelling out the misery of similar price drops experienced since 2014.

Indian buyers pile in to London’s property market on the hunt for vastu-compliant homes

A vastu-compliant north London house, £9.5m with Arlington Residential.

By Andrea Marechal Watson

Vastu, often seen as an Indian version of feng shui, dates back thousands of years. Tips for house construction include performing puja rituals on auspicious dates, preferably after consulting an astrologer.

The location and shape of the plot, light, water and internal arrangements of doors, windows and rooms are considered vital to ensuring the health and well-being of occupants.

Vastu has begun to pop up on the UK’s highly international property market. “Feng shui is a big thing for many of our clients, who will not set foot in a property unless it has had the once-over from their feng shui master,” says Penny Mosgrove of Quintessentially Estates, an estate agent. “A similar set of principles exist in vastu shastra.

“This year I was asked to find a home in Notting Hill that was vastu-compliant. There had to be various ‘main’ entrances, no bathroom near the main door, doors that were not black, a door that opened in a clockwise manner and an entrance that had not got a shoe rack near it, nor a bin.

“All mirrors needed to be on the north wall and social rooms needed to face north or at least north-east. At the centre it required a brahmasthan, which is a space for reflection without any obstructions to it.” Eventually, the right house was located and bought.

A flat in north London, £5.8m, with Arlington Residential.

There is a growing Indian community in London, active at the middle to top end of the property market. Following changes in 2015 to the Liberalised Remittance Scheme in India, which increased the capital that buyers can bring into the UK to $250,000 (£195,000) per person per year, there was a surge of buyers.

“Indian buyers are still very prevalent in London – especially when you look at the wider number of Indians that are buying, known as non-resident Indians,” says Camilla Dell, of buying agency Black Brick. “Indian resident buyers are still somewhat limited in what they can spend on an overseas property due to exchange control in India. Although the rules have become more relaxed, families are only allowed to transfer $250,000 per family member per year outside of India.

“So a family of four, after two years, would have a budget of $2 million to spend on a property. Non-resident Indian buyers are not subject to the same restrictions and so tend to have higher budgets.”

“We noticed a significant increase in Indian buyers over the last six months,” adds Simon Garcia of Quintessentially Estates. “The softening of prices and fall in the value of sterling both played a part, as many trade in dollars.”

Pimlico and Westminster accounted for around a third of all purchases by these families, both as investments and homes. Marylebone, with its boutique shops and village feel, is also popular.

Around half of Indian buyers search for vastu-compliant properties, and for those who do, it’s a deal-breaker for a sale. “This continues to be very difficult to fulfil, particularly on properties that are already built,” says Dell.

Marc Schneiderman, director of estate agency Arlington Residential, recently sold an £8 million house in St John’s Wood to an Indian family after they dismissed several other houses due to their orientation. “Their vastu adviser inspected the house and made suggestions such as removing the water fountains in the garden and repositioning furniture,” he says.

There are advantages to buying in a new development. “Last week [we] concluded a deal for a non-resident Indian client on an off-plan development,” says Dell. “The developer was open to changing the layout to meet our client’s vastu requirements.” Buying off-plan with staged payments is also easier for buyers affected by the limits of exchange control.

 

 

The areas set to step into the spotlight

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