The latest figures suggest house prices are still (just about) creeping up, despite economic uncertainty and buyer jitters. But are bricks and mortar really immune to the ups and downs of every other asset class? Where will it all end?
It never used to be like this. Before the Right to Buy scheme was introduced in 1980, only around half of people owned their own home. The majority of other households rented social housing, meaning they had security and freedom to put down roots. Should they want to buy a home of their own the average house cost £24,000, figures from the Office for National Statistics show.
Over the next decade house prices almost trebled, while incomes rose just 17 per cent. It was the start of a property price boom that has seen the average property price in the UK soar to £288,000 by the end of 2015. If the price of a chicken had risen at the same rate as property prices have over the last few decades, it would now cost more than £50. Many lay this this steady and significant increase in prices firmly at the feet of buy-to-let landlords and other property speculators piling money into bricks and mortar. But where will it end?
Ordinary investors
The affordable housing campaign PricedOut suggests that, as homeowners who’d bought in the 80s saw their property value suddenly soar, they began to view their homes as an investment rather than simply a place where they lived. Instead of selling their homes when they moved, they could keep hold of them, let them out and gain both a steady income and the potential to sell for a considerable profit.
“Speculation in the housing market absolutely affects prices,” agrees Reuben Young, a policy and communications officer at the affordable housing campaign PricedOut. “But when we say ‘speculation’, most people think of super-rich foreign investors buying up high-end property. In reality most speculation is done by ordinary people.
“Ordinary people are speculating on the housing market if they’e purchasing a house because they expect it to increase in value. This doesn’t make them bad people – it’s just a product of the housing system we have, where homes are seen as economic assets before they’re seen as infrastructure or places to live.”
“There’s been no five-year period since records began 40 years ago where an investor would have made a negative return once you take into account price growth and return,” says Mark Weedon, head of institutional investment at crowdfunding platform Property Partner. He rejects the use of the term ‘speculation’ for property investment, arguing it’s a secure asset class where most people invest for the long term.
However, he accepts its popularity has helped fuel price inflation. “It’s definitely had an impact and that impact has increased markedly in recent years. The private rented sector has grown enormously for the best part of 30 years and that’s really picked up more recently. For example, between 1995 and 2015, the private rented sector increased from just 10 per cent of households to 20 per cent. It’s fair to say that it’s had some impact on prices because an increasing proportion of the overall demand has come from investors.”
And this is likely to get worse without intervention. Dan Wilson Craw, of the tenants’ rights group Generation Rent, says: “When people are buying homes in order to speculate in prices instead of to live in, you see that becoming a self-fulfilling prophecy as more investors pile in, prices go up and so more investors pile in.”
This can have a negative effect even on tenants who don’t wish to buy. He adds: “It affects the behaviour of the investor in relation to their tenants. They might decide to sell when the price is right and turf out a family who’d been hoping they were in a long-term home.
“Where landlords and other property investors are investing for price rises, that harms tenants and creates their own customer base by stopping them from buying and forcing them to rent.”
More homes, fewer issues
“What is definitely clear is that the UK economy now more than ever requires good quality housing across all types of tenure,” says Mr Weedon. “There is a large body of people in our society who will never be able to afford to buy, irrespective of government help schemes they will never have the income or family wealth to buy a home. Higher up the social mobility scale, in every town and particularly big cities and certainly London there’s a meaningful part of the workforce where it’s not appropriate to buy – they require flexibility and mobility.
“You could argue that we’d have an even bigger problem on our hands if the Government pushes more people into home ownership at the expense of the private rented sector, which could restrict availability and affordability for people who need to rent not buy.”
Current efforts to help new buyers by penalising investors have been criticised by landlord groups but Camilla Dell, managing partner at independent property buying agency Black Brick, thinks the clampdown is hurting first-time buyers too.
She comments: “The reality is that the intervention may have actually made things worse for them. As a result of changes to Stamp Duty, we now see a far greater number of investment clients buying smaller properties for investment and directly competing with first-time buyers. I feel that the new Chancellor now has an opportunity to address this and alter the very punitive levels of Stamp Duty that we now see, which should help diffuse some of the competition at the lower levels of the market.”
Constrained supply
Perhaps investors couldn’t create such waves if the pool was deeper. Only 142,890 new homes were completed last year, with some analysts arguing we need at least 300,000 a year to meet the needs of a growing population.
Mr Young says this is the only way to bring prices back under control. “The Government should commit to ending house price inflation,” he argues. “This would be a major shift away from current policy, which is to expand home ownership by subsidising demand. Help to Buy, Right to Buy, Starter Homes… these are all demand-side policies which increase prices. The only way to curb price rises and make housing affordable is to increase supply or reduce demand.”
It seems that, once again, the only answer to the country’s many housing issues is to build more homes. Frustratingly, the charity Shelter has recently warned that if more is not done to increase supply, the Government will miss its target of a million new homes by 2020 by more than a quarter.
Should that be the case, investors and owner-occupiers will continue competing over an inadequate supply. And when supply is inadequate to meet demand, prices will keep on rising.
It’s all fine and dandy, until you try to sell up: there are fewer buyers and they tend to be more picky. Experts share their tips to ensure you seal the deal
Owning a house with four or more bedrooms and a couple of acres of land might not seem like something to complain about. But if you’re trying to sell a home that’s on the large side, you may well have found that what you thought was the ultimate aspiration can actually be a real headache (not that you’d let any of your space-starved friends hear you whinge about it — much).
Research by the property portal Rightmove shows that, in July, homes with four bedrooms or more took the longest to sell: typically 74 days from being advertised online to being marked as sold subject to contract, compared to an average of 58 days for one-, two- and three-bedders. That’s not such great news for the thousands of parents who, with their children heading off to university, have decided it’s time to downsize.
As well as being patient, owners of sprawling pads have to be ready to cut the asking price. “Our analysis of the first half of this year shows that properties where the achieved value fell below the asking price sold at an incrementally slower pace,” says Oliver Knight, a country research associate at Knight Frank estate agency. “When the achieved value was 90%-95% of the asking price, exchanges took an average of 12 weeks. This compared to two weeks when there hadn’t been a reduction.”
Beyond the average family home, of course, those with serious square footage have fewer potential buyers — especially since the higher rates of stamp duty made the cost of moving up the property ladder substantially higher. So you’ll need to be realistic if you really want to sell.
“Correct pricing is key in today’s market,” says Rupert Sweeting, head of the country-house department at Knight Frank. “I am always advising clients to be brave enough to make the house look good value, as this approach will increase the number of viewings and the likelihood of competitive bidding.”
Alongside price, Sweeting adds, it has to look good — obvious to some, but it’s amazing how many houses are shown to viewers with beds unmade, dirty clothes strewn over the floor and the loo seat left up. This makes for a stark contrast with the decluttered, styled photographs in the brochure. “First and last impressions count, as many buyers make up their mind within the first or last five minutes.”
Even if you’ve got price and presentation covered, there’s a host of other thorny issues to tackle when trying to sell a large home. Here’s our tailor-made guide.
Does my house look big in this? Your brochure — whether online only or in vellum-bound glossy print, with drone shots — is your bible. And whether you have four bedrooms or 10, a modest garden or acres of parkland, every inch of it has to look good for the photos (and be maintained). Yes, we’re all bored with hearing about decluttering, but it’s a vital tool in presenting a fresh-looking home.
Don’t leave the place bare, though, says Richard Barber, director at the prime central London estate agency WA Ellis. “Good furnishings ensure the property is photographed well. If your home is empty, rent furniture with help from an interior designer. Spending £10,000 will easily add £20,000 at the £1m level.”
As for the grounds, have them photographed when they are at their best and full of colour. “Even if you want one more Christmas in the family home, have your pictures taken earlier in the year, when the garden is in bloom,” says Caspar Harvard-Walls, a partner at the buying agency Black Brick.
Other things to stress in the brochure (if you can) are low heating bills and the fact that the price includes curtains, carpets and any specialist garden machinery — which will help ease in new owners.
Do your homework You need to be ready for when someone makes you an offer you are prepared to accept. Decide on the price point and timescale you are happy with. Before the “For sale” board goes up, get all your legal paperwork in order, including any related to building regulations and planning consents, so nervier buyers don’t pull out.
A view to a kill You want to make a good impression from the second potential buyers arrive. “Ensure the driveway is clear of boats and spare cars, and freshen it up with gravel — but not so it feels like a painful walk along Chesil Beach,” says Richard Banes-Walker, a partner at Strutt & Parker estate agency’s office in Farnham, Surrey. You’ll also want to keep the house welcomingly warm on chilly days, so don’t spare the thermostat.
It may be a good idea to make yourself scarce, at least during first visits. “An owner being present on a viewing more than halves the chance of a sale,” says James Robinson, general manager at Lurot Brand, a London estate agency. “Regardless of the size of the house, your being there will make many buyers feel claustrophobic. And you probably won’t like what your agent needs to say about the house in order to sell it.”
If it really is vast, the innovative features that make it liveable should be stressed. Laundry chutes, lifts and intercoms can make things feel more manageable, and maintenance should seem smooth — have average running costs ready on a spreadsheet. Above all, make sure viewings are kept interesting: even the most committed buyer’s attention will flag once they have done the 20,000 sq ft mansion, polo fields, stabling, leisure suite and office complex. Work with your agent to set up refreshment pit stops where your home or grounds can be seen from flattering angles.
If you’re not sure how to pitch it, you could always enlist a friend as a “mystery shopper” and test-drive the agents’ patter — but, again, be prepared for some brutal honesty.
From garish to greige Getting rid of that creepy doll collection, toning down the purple walls and hiding those nude photos of yourself can never be a bad thing, but the process of “essential neutralisation” that many agents extol can be taken too far. In fact, making a home too neutral, and a canvas too blank, can be offputting, as the Los Angeles-born composer Brian Banks, 60 — who has worked with musicians including Michael Jackson and David Bowie — and his British wife, Sarah, who runs his production company, have decided.
The couple bought Elberton Old Manor, a grade II listed house set in 1.7 acres of gardens near Bristol, for just over £1m in 2004, and have spent about £500,000 creating a luxurious family country home. They have restored the property, which has almost 8,000 sq ft of living space and seven main bedrooms, and created state-of-the-art equestrian facilities, but now their daughters, Charlotte, 19, and Elektra, 16, are leaving home, so they are selling up for offers over £2m.
“The kitchen is quite neutral and the bathrooms are classic, but we have a piano, all our artwork and clearly defined living spaces with different feels to them,” Sarah says. “It’s a quirky, interesting home, and I think people want to know a place is truly loved and live in.”
Size matters
• Don’t be greedy. If you price your home correctly, it should sell, whatever its size.
• Keep up the cleaning and tidying. A home should be immaculate for every viewing, inside and out, not just the first.
• Discuss strategies with your agent. A particularly appealing room or feature should open and close a viewing: most decisions are made during the first five and last minutes.
• If you have extensive grounds, make sure you have a pit stop set up for refreshments — you don’t want to exhaust viewers.
• If your house needs work, and you can’t afford to get it done yourself, get detailed quotes prepared.
• All legal documents and paperwork should be in order from the off. Many buyers end up pulling out because they are not prepared to wait.
You love your home – the quirky corners, creaky cupboards and all the memories. But if you do put it on the market, you’ll probably have to make a few small tweaks to ensure it appeals to prospective buyers – and ultimately get the right price. We chatted to some property experts about how to boost your home’s appeal.
As well as decluttering and treating all the walls and doors to a new lick of paint, there are lots of ways to convince buyers that your home’s the one for them. For starters, think about who your buyer is likely to be.
‘If you have a family house, focus on making sure that the kitchen looks its best rather than on whether the surround sound system works,’ advises Caspar Harvard-Walls, partner at property buying agency Black Brick. ‘If the property is likely to appeal to a professional couple, then the master bedroom and bathroom are more relevant.’
What’s in store?
Ample storage space is the top priority for homeowners, according to a study by Furniture123 – with 26 per cent claiming that this was the most important factor to them and 19 per cent reporting that they’d previously turned down a property because of its lack of storage space. But it’s not just a case of stuffing things in cupboards – the space should look neat inside, too, especially if someone might open the cupboard door.
It’s great to be able to give buyers the run of your home without hovering over them, so remove anything fragile and hide your valuables away. Check which of your possessions are covered just in case something does go missing after the tidy-up.
Hidden treasures
Your family photos and holiday mementos may evoke cherished memories, but for visitors they could give the wrong impression.
‘This is definitely the “selfie era” but, when you’re selling, it’s time to take a step back,’ says Walter Di Martino, head of communications at property portal Gate-Away.com. ‘This means removing family portraits from walls and furniture so potential buyers will be able to envisage themselves and their families in your house, not you.’
Also make an effort to remove any pet traces from your home, as not everyone likes animals and some may even have allergies. While no one expects your pets to go on holiday while your house is up for sale, keeping evidence to a minimum can help. Tidy away litter boxes, toys and food dishes, and don’t forget to vacuum dog and cat hair off your sofa and carpets.
A quick fixture refresh
Before you put your house on the market, it’s time to brave the ‘man drawer’ for the WD40, some batteries and a radiator key.
‘Your house will seem old and not well maintained to the attentive eyes of the prospective buyer if things don’t work perfectly,’ warns Walter Di Martino. ‘Try using some lubricating oil on window, door and cupboard hinges to get rid of squeaks.’
Next, check that all the electrics work, from the doorbell to the smoke detectors, and, if necessary, replace the batteries. After all the doors stop squeaking and the lights stop flickering, bleed the radiators.
‘A functioning heating system is key to making the property cosy, warm and inviting,’says Karl Tulloch, founder and MD of home repairs and service provider Rightio. ‘Not only will a toasty house make the viewer feel positive, but it subconsciously reinforces the idea that this will be a low-maintenance property that’s easy and cheap to heat.’
Don’t forget the basics
No one likes living in a show home, but simple things – such as loading the dishwasher or washing up after each meal – will make sure you’re not caught out with a display of dirty crockery.
Comfort is also important, so think about where your buyers might sit down. Plump up cushions, flip mattresses and soften up any furniture you’re leaving behind with throws and cushion pads.
‘Once a viewing is booked in, make sure you leave the property tidy, with the curtains open and beds made,’ adds Jo Eccles, MD of Sourcing Property.
You can’t do a proper clean without shifting the furniture to clean underneath it – you could even rearrange to create more space in the living room. Once you’ve found the best arrangement for feng shui, get rid of any pesky dents left in your carpet with ice cubes – yes, ice cubes! Watch how on our cleaning tips video.
As well as surveying the floor, buyers’ eyes are usually drawn to ceilings and walls as they look for signs of damp or leaks. Make sure you paint over signs of historic issues (that are now fixed!) to reassure them that they’re looking at a well-maintained home.
Dress to impress
Arrange viewings for when your property looks its best during the day – for example, when it has sunlight streaming through the front windows or onto the garden. You could also let your neighbours know when your viewings will be, just in case they’re planning a noisy party or renovation work.
If evenings are the only time you can do, or you’re selling your house in winter, viewings will benefit from a light boost, so swap bulbs in lamps and ceiling fixtures for those that give out a crisp, bright light. This will help to create a warm welcome, but a strategically-placed doormat and somewhere to hang coats make buyers feel even more at home – plus it’ll help keep muddy footprints at bay.
A nasty niff (perhaps from the aforementioned mud on the carpet) can put buyers on their guard, but a great smell will have the opposite effect. Keen bakers can opt for whipping up a batch of fresh cookies, but you could also consider scented candles, a discretely hidden diffuser or fresh flowers and plants dotted around each room. The benefit of baking is that you can offer your treats to guests afterwards, accompanied by a refreshing drink to wash it down.
Once everything’s prepped to perfection, make sure that any photos of your place are taken with a wide-angle lens that it looks its absolute best on property sites.
You’ll be surprised how just trying a few of these small steps can really increase your chances of a sale – even in a difficult property market. In fact, you may even find yourself falling back in love with your home yourself!
Apartment C.08.1 in London’s luxury One Hyde Park development by Candy & Candy – the most valuable block of flats in the world – came with a price tag of almost £63m ($83m), making it the most expensive home on the open market in the UK.
But it has just been removed from sale for the fourth time in four years, apparently still unsold, as the super-prime property market feels the heat from a number of tax increases by the Treasury.
Sprawling for nearly 9,000 square foot across a whole floor of the building, Apartment C.08.1 has views over Hyde Park, all the highest quality fixtures, fittings and finishing, high-tech gadgets, a concierge service provided by The Mandarin Oriental Hotel, a gym, swimming pool and spa, opulent bespoke interior design by Candy & Candy, and much more.
The current owner, thought to be the used-car magnate Geoffrey Michael Warren, has tried to sell it at least four times since 2012, slashing the price tag by £2m along the way.
The property’s agent at Savills in Knightsbridge was contacted for comment on 22 August, while the apartment was still listed as for sale, but did not reply. However, in the 24 hours between the approach for comment and the publication of this article, the property was again removed from the market. The listing has not, as is common when a sale is agreed but the paperwork incomplete, been updated to mark the property as “sold subject to contract” or “under offer”.
“I’m afraid we are not able to help,” said a spokeswoman for Savills when asked if the property had now sold. Warren, 61, was approached for comment via his company Cargiant, but no reply was received.
“I think the super-prime end of the market has been going down in terms of values for almost two years,” said Caspar Harvard-Walls, a partner at the buying agent Black Brick. “A lot of people are laying the blame at Brexit’s door, but really the market had shifted before that.”
It is a series of tax hikes on high-end and investment property – such as higher stamp duty for expensive and second homes, the introduction of capital gains tax for foreign investors, and an annual levy on homes owned by offshore structures – which are the biggest drag on demand.
Moreover, a glut in the supply of luxury newbuild property in London makes One Hyde Park less unique that it once was. “All of those things have had a big impact on that end of the market,” Harvard-Walls said. “As a result, you probably will see some of these properties hanging around for much longer than they would have done a few years ago.”
The market for super-prime properties is tiny: there have been just three sales of properties in England and Wales worth over £20m in 2016 so far, show Land Registry figures. Between 2011 and today, there have been 36 such sales. By comparison, in the year to date there have been 350,252 home sales in total in England and Wales.
Finding the bite mark
Apartment C.08.1 was first put up for sale by the current owner through the agent Aylesford International in May 2012 with a price tag of £65m, but later removed from the market, despite some high-profile media coverage on MailOnline and Forbes.
The apartment reappeared on the market in May 2014, this time listed by Savills and for a price tag of £68m. Again, it was removed from the market — only to pop back up a year later in June 2015, listed at £75m and including a promise to pay the buyer’s potential £9m stamp duty bill after a tax hike by the then-chancellor George Osborne.
Having been removed from the market again, it was in April 2016 relisted by Savills for one pound shy of £63m – 3% lower than its 2012 asking price, 7% below is 2014 price, and 16% below the 2015 price including stamp duty. The promise to pay the buyer’s stamp duty has since vanished – and so has the latest advert.
“Values have come down and transactions have fallen so therefore sellers are having to be more realistic,” Harvard-Walls said. “These things are rare. That’s why they’re very, very hard to value.”
Contrary to popular belief, not every tenant is the victim of a cruel property market denying them the right to own a home and condemning them to a dangerous, overpriced hovel that has been left in disrepair by a modern Rachmanite.
A spring report suggested almost 80% of private renters were happy with their home and what they got for their money. Figures released last week also showed that, in July, average annual rents in London fell for the first time in six years, as landlords flooded the market with buy-to-lets. While the decrease was just 0.5% — or £7 on a typical £1,280 a month — Countrywide estate agency estimates that tenants now have 23% more homes to choose from in the UK than this time last year.
At the top end of the market, more people are opting to rent rather than buy. And they’re about as far from the image of the downtrodden tenant as you can imagine — we’re talking billionaire business types, international investors and some of the world’s top athletes. This new breed of affluent rentysomethings falls into four categories.
Stamp-Duty Savers
Sales of high-end homes have plummeted in recent months, mainly because of high levels of stamp duty. Duty payable on purchasing a property at £15m can now be as high as £2.14m — about three years’ rent for a home of comparable value.
Knight Frank estate agency says the number of homes worth £10m or more let successfully to renters in prime London increased by a third in the year to March, while sales of homes in the same price range and the same areas have dropped by about 30%.
“With enormous stamp duty, mistakes can be costly, so many more people are now renting. And with economic uncertainty, our overseas visitors are in no hurry to buy,” says Mark Tunstall, founder of the high-end letting agency Tunstall Property London.
Ironically, the glut of high-end renters is more than matched by the glut of frustrated owners who cannot sell their ultra-expensive homes and so seek to let them out. Knight Frank says rents fell 2.3% in prime central London in the year to May, with 18.1% more high-end flats and houses for renters to choose from.
Sporting Super-Renters
The specialist agency Tennis London finds homes near the All England Club for Novak Djokovic, Roger Federer and the Williams sisters for Wimbledon fortnight, but it’s football’s new signings that make letting agents’ mouths really water. Professional soccer contracts finish on June 30, with the transfer window opening the next day, triggering up to 100 high-value player moves within the UK. “Many of these are working-class kids aged 19 and upwards who have come into money and find themselves renting homes that, outside London, could cost £10,000 to £15,000 per month,” says Stephen O’Kane, head of the sports, media and entertainment division at Savills estate agency.
Footballers such as Olivier Giroud and Hugo Lloris have opted to rent rather than buy. Chelsea players gravitate to Cobham in Surrey; Spurs players look to Hampstead; and signings for the Manchester teams head to Cheshire. “They often want new-builds with modern interiors, perhaps in gated complexes,” says O’Kane. “Most know that their professional lives can be relatively brief, and so not that many commit to buy, at least not while they’re young. Many recognise that property is a good investment, so they put some of their earnings into a buy-to-let, even if they rent themselves,” he says.
Global Brexit Opportunists
Post-Brexit, long-term uncertainty may create the occasional bargain home for Brits moving up the ladder, but the real winners are foreign buyers in central London who are benefiting from lower asking prices and a weak pound.
Some feel the sales market is on the floor and have bought, but others — along with some canny locals — are renting because they think prices have further to fall. “We may see more and more would-be buyers opting to rent in the short term to give them greater flexibility. When the buying market slows down, the rental market usually picks up,” says Jo Eccles, founder of the buying agency Sourcing Property.
Camilla Dell, managing partner at Black Brick, another buying firm, says the fear of a possible second Scottish independence referendum is also boosting demand from Scots for high-end rentals in London.
Music, Movie and TV Tenants
Matt Damon took over a pad in Paddington, London, while filming the fifth instalment of the Bourne franchise. Harrison Ford, Carrie Fisher and Mark Hamill all rented near Pinewood Studios in Buckinghamshire when they shot Star Wars: The Force Awakens last year. The accommodation costs were nothing compared to the $2bn the movie made.
“Film shoots start at about 5am so renting near the studio is important. Likewise, if a musician rents while he’s doing a tour of the UK, being near Heathrow or transport links becomes the key criterion,” O’Kane says.
There have been no reports of A-listers complaining about mould or dodgy electrics — although Margot Robbie, the poster girl for A-list flatsharers, has moaned about the boys in her shared Clapham house stealing loo roll.
Having money to spend on the rent doesn’t guarantee a perfect rental property. Some consolation, perhaps, for the more typical tenant who is saving for that elusive deposit on their first home.
A leading London buying agency is warning that some areas of prime central London could face a downturn following the Brexit vote – but that the world’s “global elite” won’t be affected by the UK leaving the EU.
Camilla Dell, managing director of the Black Brick agency, says investors drawn to homes selling in the sub-£2m price bracket will continue, because of those properties’ favourable yields and domestic demand.
But she warns “the same can’t be said for the prime and new-build outer prime markets.”
Dell says sales of homes priced between £2m to £5m and then £12m to £15m are in many parts of prime London dominated by investment bankers and hedge fund managers.
“We do not expect the wholesale flight of financial services firms away from London, but it is likely that they will lose their ‘passporting’ rights, or their ability to sell financial services across the EU, if the UK does leave, triggering the departure of some financial services capacity to Dublin or the continent” she warns.
“Even relatively low numbers of bankers leaving areas such as South Kensington or Notting Hill – where European bankers, in particular, tend to be concentrated – could have a significant effect on local markets over the next couple of years.”
The agency also expects what Dell calls “the new-build outer prime market” to suffer most from continuing uncertainty, having already experienced a lull before the referendum vote.
“Areas such as Nine Elms in Vauxhall and Earls Court in west London are particularly vulnerable due to oversupply of expensive properties aimed at the overseas investor. However, there are a handful of stand-out developments – such as Television Centre – that we believe are likely to continue to prove popular, and there will certainly be bargains to be had, particularly on the secondary market” she says.
However, Black Brick expects the Super Prime market – which it describes as homes costing £15m to £20 or even more – to be the least negatively affected, with the collapse of the sterling meaning that dollar buyers are actually factoring in a 12.5 per cent increase in their purchasing power since before the poll.
“For the global elite buying properties at £15-20m or above, purchases tend to be about lifestyle choices rather than business decisions, or are to diversify extremely large portfolios. Indeed, we are still seeing transactions continue; Brexit did not feature in conversations with clients in this part of the market before the referendum, and it’s unlikely to be much of a factor now.”
London is going to retain its attractiveness to wealthy international buyers regardless of this outcome
Camilla Dell, Managing Partner at Black Brick
“Now that an ‘out’ vote has been cast, we will, no doubt, experience a period of ongoing uncertainty as the UK seeks to agree a way forward with the EU. Sterling may weaken even further, making London property even more attractive to foreign buyers.
“In general terms, London is going to retain its attractiveness to wealthy international buyers regardless of this outcome; its cultural attractions, geographic location, legal system, and concentration of talent mean that there will always be demand for Prime Central London property.”
“Trying to pick an off-plan development which is likely to appreciate upon completion, is extremely difficult and a high-risk strategy for investors. The main reason is that, often, new builds command a significant premium compared with surrounding existing property prices, so you are buying in the hope that the development will significantly outperform local property prices. You can increase your chances by buying into a low density (fewer than 100 units) development where, if the development proves popular, there is a demand vs. supply imbalance which would lead to an increase in prices. The development also has to tick many other boxes such as location, proximity to transport links, and shops.
Questions to ask
1. How many units are there?
2. What is the break up between one, two, and three bedroom units?
3. Which direction does your unit face? South facing is always going to be the best in terms of light.
4. Are there other developments planned in the area? This will hugely affect the investment potential – if there are thousands of units planned in the immediate area it could significantly reduce the investment potential.
5. Will your view be affected by future development?
6. Are you able to assign your contract? This is crucial if you plan to sell the property before completion as some developers prevent this in the sales contract meaning you have to wait until all units are sold before you can sell yours.
7. What is the anticipated service charge? Again, this is key as a high service charge will eat into your rental yield if you plan to let the property.
8. What are the staged payment plans?
9. How many units have already sold and what is the buyer profile?
10. What other schemes has the developer built? If possible, it’s a good idea to go and visit a previous development to get an idea of the quality you can expect from the developer.”
If you’re looking for property within an easy commute of London, then consider areas close to the next high-speed rail route and you could make a tidy profit too.
Until fairly recently, it has been hard to get too excited about Crossrail 2 – the proposed high-speed rail route that got the green light in March. It will link south-west and north-east London, as well as stretching out as far as Hertfordshire and Surrey, but the preferred route has not been confirmed and it’s not due for completion until 2033. Not many of us have the vision – or the money – to think that far ahead when it comes to investing in property.
But Crossrail 1 – renamed the Elizabeth line – will be fully operational in less than three years and a whole host of research has come out illustrating how property prices have risen close to its stations. So investors who missed the boat the first time round will want to make sure they pick up a bargain in potential property hotspots along the Crossrail 2 route.
This could be attractive to buy-to- let investors wanting a property that will increase in value. But first-time buyers priced out of the London property market could also find opportunities along the route.
While some areas on Crossrail 2 are bound to perform better than others, it’s hard to see how investors – or home buyers – along the route won’t benefit from its impact.
Johnny Morris, research director at Countrywide estate agents, says: “Our research shows the average landlord holds a property for 17 years, which for someone buying today would take them to around the Crossrail 2 opening. So for those looking for a long-term investment, as many do, it’s definitely worth thinking about Crossrail 2 today.”
However, he adds that the new rail route should not be the main reason for investing in an area. “If you’re going to keep a property for 17 years, you need to make sure that you can rent it out successfully so that it has sufficient yield to cover your costs. There would be no point buying a home in an area with a very small rental market on the prospect of Crossrail 2 because that would just be bad maths.”
It’s more of a case that if you are already thinking of investing in an area – say, south-west London – and you have a choice between buying a property in Wandsworth or Wimbledon, the fact that the latter is on the Crossrail 2 route might influence your decision.
Lessons from the Elizabeth Line
To get an idea of how much property prices could rise along Crossrail 2, you only have to look at how the housing market has performed along the Elizabeth line – and it isn’t even open yet. According to figures published earlier this year by property portal Zoopla, average property prices along this route went up by 52% – that’s £182,727 – since building work began in 2009.
This put the average property along Crossrail 1 at £522,192 in February 2016, compared to the national average of £298,883 – a difference of 54% (see map below, click to enlarge).
A separate study by financial services firm JLL, analysing areas within a 750-metre radius of each Crossrail station and looking mainly at opportunities for new-build housing, shows that some Crossrail 1 locations are expected to see house price growth of 16% above the Greater London average by the end of 2020, with the biggest winners being Woolwich, Whitechapel, West Drayton and Ealing Broadway. It says that, on average, house prices around Crossrail stations will be 7% higher compared to non-Crossrail stations.
The importance of being close to transport links was highlighted in Knight Frank’s Tenant Survey 2015/16, which sought the views of 5,000 tenants. It found that 71% of Londoners think transport links are the most important factor when choosing a rental property.
According to Knight Frank research from 2015, homes within a 10-minute walk of stations on the Crossrail 1 route have outperformed those in the wider boroughs by an average of 5% since the initial Crossrail plans were granted Royal Assent.
James Barton, partner at Knight Frank City and East, sees no reason why the ‘Crossrail effect’ won’t have a similar impact on houses close to the new route. “Focusing specifically on Greater London, Crossrail 2 will open up areas where the delivery of new homes has traditionally been stunted due to lack of accessibility. In areas such as Waltham Cross,we expect Crossrail 2 to have a particularly positive impact on the property market,” he says.
Playing the waiting game
While it’s tempting to consider areas along Crossrail 2 for buy-to-let opportunities, JLL points out that for Crossrail 1 the majority rental growth will come about only when the route is up and running. While buy-to-let investors are likely to see their property close to Crossrail 2 stations increase in value, they will have a long wait before they enjoy increased rental yields.
Jamie Burnhope, consultant at buying agent Black Brick, agrees that investors need to focus on capital gains. “One of the quickest ways to see capital appreciation from property investment is to buy into an area which is set to benefit from improvements to transport infrastructure. We’ve seen it happen since the opening of the East London Line and we’ve seen it in London and beyond since the announcement of Crossrail 1 – and it’s not even operational yet,” he says
A tip for first-time buyers
Consider funding your property with the Help to Buy London scheme.
It is open to first-time buyers – and home movers – buying a new-build home worth up to £600,000 in any London borough. It means that you can borrow a government-backed equity loan of up to 40%, while you only need to put down a 5% deposit and will get a mortgage of up to 55% to fund the rest of the borrowing.
The loan has to be paid back in 25 years or when you sell the property if this is sooner.
The loan is interest-free for the first five years and then you have to pay 1.75% in year six. It then rises by the Retail Prices Index plus 1%.
Lenders who support the Help to Buy scheme are Aldermore, Bank of Scotland, Barclays, Halifax, Leeds, Lloyds, Nationwide, NatWest, Royal Bank of Scotland, Santander,Teachers and TSB.
If you are thinking of buying along the Crossrail 2 route, bear in mind that if you buy a property outside a London borough, you will only be eligible for a 20% government-backed equity loan.
Watch out for areas along the route that are spread across London and the Home Counties. For example, some properties in Worcester Park are in the London Borough of Sutton, while others are in Surrey.
“With [the planned route for] Crossrail 2 not having been confirmed yet, now is a
good time for the risk-taking investor to buy in early to an area that is likely to be on the line.”
Mr Morris says: “It’s a safe assumption that prices of homes near a Crossrail 2 station will see a bigger increase than the equivalent place not near a station. If you improve the transport links of an area – and make it easier to get to central London – prices will increase relative to the surrounding area. Equally, if prices were to go down, they would fall less in these areas.”
On a final note, it’s worth remembering that the current route is just a ‘preferred’ one and could change. In particular, no decision has been made about whether the route to New Southgate will go via Wood Green or Turnpike Lane and while Balham is the preferred mid-way stop between Clapham Junction and Wimbledon, there is still a possibility that Tooting Broadway could be chosen if construction methods being tested at Balham prove problematic.
Transport for London is planning another public consultation on Crossrail 2 towards the end of this year and no date has been set to consult on the final route.
Potential hotspots
Investors are likely to get more for their money in the outer reaches of the proposed route, where the line will connect with the existing national railway network towards Hertfordshire and Surrey, given that properties close to the central London transport hubs along Crossrail 2 have already seen huge price hikes.
Tottenham Court Road, for instance, which is also on the Elizabeth line, has seen house prices go up by 66% between May 2009 and February 2016, according to property portal Zoopla, with average property prices at an eye-watering £1.85 million.
Instead, it might be better to focus on housing on the northerly edge of the proposed route, running through Enfield Lock, Waltham Cross and Cheshunt to Broxbourne in Hertfordshire.
However, be warned: house prices in this region are already rising way above the national average, and that’s before the Crossrail 2 route has been officially confirmed.
While property prices in the UK went up by 8.2% over the year to April 2016, prices in Hertfordshire – which includes Waltham Cross and Broxbourne – went up by 15.5%,
with an average price of £371,493 according to the latest UK House Price Index (UK HPI).
In the district of Waltham Forest itself, house prices went up by a whopping 25% over the year, with the average price now standing at £424,663. In nearby Enfield, houses sold for 17.8% more than in April 2015, with the average property a slightly more affordable £379,174.
Heading south, UK HPI data shows that properties in Surrey went up, on average, by 11.9% in April, with houses selling for £427,981.
In Kingston upon Thames, house prices in April were up 12.6% on the previous year, with the average home selling for £484,213, while in Epsom and Ewell, house prices went up by 14.4% annually, averaging out at £454,840.
The lead up to the EU Referendum has dark clouds brewing over London, with experts predicting everything from economic shocks to the ‘Brexit bounce’. But are there even bigger storms coming?
Much like the weather, trying to predict the future is a tricky business, none more so when it comes to trying to foretell changes in the housing market.
With the EU referendum drawing ever closer one of the major questions looming over Brexit is the effect it could have on north London property prices.
If you own, or would like to own, property in north London should you be concerned about what will happen to the value of your home, excited about a potential dip in prices, or blasé that things will right themselves in the long term?
With the advice of many in the property industry directly contradicting reputable economic opinion, there is plenty of scope for confusion.
Stand alone success
Self-confessed “fervent” Vote Leave enthusiast Trevor Abrahmsohn, director of Glentree Estates, predicts a glorious future should Britain vote to exit the EU.
“After the initial turmoil of leaving, the benefits will be there for all to see,” he says.
Goldman Sachs and HSBC predict that sterling could plunge by as much as 20 per cent following a Brexit, but Abrahmsohn is adamant that this would have an ultimately positive effect.
If the pound drops against the dollar but remains comparable to the euro, Abrahmsohn predicts that the effective discount on property prices could encourage overseas buyers who are currently put off by high taxes.
New research conducted by real estate investment management firm JLL also suggests that a correction in property prices could contribute to a ‘Brexit bounce’.
However Guy Grainger, head of EMEA for JLL has warned that this initial boost would precipitate at least two years of serious uncertainty.
And that’s bad news for Hampstead asset rich but cash poor home owners relying on the value of their homes to see them through retirement or help their children or grandchildren financially.
George Osborne has warned that Brexit could cause house prices to drop by as much as 18 per cent.
The Chancellor has dire warnings too for those who don’t yet own their property outright anticipating interest rate rises and a consequent rise in the cost of mortgages.
“If we quit the EU the country would be poorer, there would be volatility in the financial markets that would push up mortgage costs irrespective of what the Bank of England might do with official interest rates,” the Chancellor told the Sunday Times.
Brexiteer Abrahmsohn has a few choice words to offer on this point.
“Nonsense. Hogwash. Tosh. Poppycock. Interest rates are not going to go up. The Chancellor is propagating scaremongering of the worst type.”
Dip in demand
Whilst accusations of scare tactics fly on either side of the debate, some north London property experts are genuinely concerned that a UK exit could lead to a serious dip in demand.
“It could be catastrophic for the London market,” warns James Morton, director of Benham & Reeves.
He predicts that should the UK leave, global banks will relocate their headquarters, prompting an exodus of financial service workers who currently work, live and educate their children in London.
“Staying in means we know what we’re dealing with. Leaving would mean a potential economic shock.”
If the banks leave, homeowners may be forced to sell up and relocate to other financial centres such as New York or Dubai, potentially flooding the market with supply but no demand, Morton warns.
Areas such as West Hampstead have a high concentration of residents employed in the financial services, leaving it particularly vulnerable to this in the event of Brexit. West Hampstead estate agent Oakhill Residential calculates that of the 9,800 homeowners in NW6, 9.7 per cent are employed in the sector and could be prompted to leave London.
Switzer-bland?
“Where are they going to go?” asks Mark Pollack, founding partner at Aston Chase
“I’ve had high net worth clients who have re-located to Switzerland [for tax reasons] only to come back because it’s not as interesting. They have more money but it’s boring there! I don’t think there’s an alternative city to London.”
A swing voter, Pollack stresses that whilst there are potential negatives and positives with both outcomes, London’s cultural caché will remain the same whatever the eventual vote.
“Ultimately, whatever the outcome, life goes on. Fundamentally what makes London great won’t change overnight. I feel confident that London will be okay.
“If we stay in we might see a flurry of activity but I don’t see prices surging.”
Robert Bixby, regional director at Anscombe & Ringland concurs that London’s popularity will trump whatever voters decide on June 23.
“The reality is that north west London will remain hugely popular both nationally and internationally.
“Whether we remain in Europe or leave, St. John’s Wood, Hampstead, Highgate and further out to Finchley, Totteridge and Barnet, will retain their interest and attraction from an international buying market.”
North London’s got the stamp duty blues
Camilla Black, managing partner and founder of Black Brick Property Solutions has noticed her overseas buyers falling into two camps: the concerned and the carefree.
“For some buyers it’s put them off, for others they couldn’t care less,” she says.
Having recently closed a deal with an overseas buyer for £55 million, Black is dismissive of claims that Brexit is responsible for the property market’s woes.
“There’s been too much emphasis on Brexit for being at fault for the slow market,” she says. “It’s just a nice excuse for people.”
Instead she names the changes to stamp duty for buy-to-let and capital gains tax for putting the brakes on the market.
Leave, remain, or on the fence, property experts agree that Brexit is yet another tremor in the seismic shifts the London property market is currently experiencing.
Higher taxes have discouraged investors, hitting the middle to higher price brackets of the London property market hardest over the past two years by deterring the overseas buyers that have pumped up property prices for so long.
Whilst London remains a valuable asset in any global property portfolio the market has undeniably slowed, and uncertainty has become the watchword and curse of the London property market.
Some believe a vote to remain will mean a return to the status quo, putting an end to market uncertainty, while a leave vote would have the opposite effect, because negotiating a Brexit could take years and the terms of any deal are unpredictable.
A report from Hometrack warns that the London property market remains the most vulnerable to any referendum result shocks and predicts that, given past form, London could see a drop in transactions of up to 10 per cent following a Brexit.
An uncertain future
The analysis suggests that more uncertainty may be yet to come, regardless of the result.
Richard Donnell, insight director at Hometrack says: “After a period of strong house price inflation over the last five years, the London market faces greater headwinds irrespective of the referendum vote. Turnover fell seven per cent last year on the back of affordability constraints and weaker overseas demand.” The future is looking far from sunny, either.
“Tax changes for investors will reduce demand and we expect price growth to slow in the near future even if sterling were to weaken and improve the relative value of central London property,” he says.
Lest any first time buyers think that this would help them get a foot on the property ladder, Paul Cheshire, professor emeritus of economic geography at the London School of Economics, says leaving would cause a shock to the economy he predicts could last a decade.
Writing on The Conversation, he says that while house prices may fall, this would mean that house builders would build less, decreasing supply. Combined with the hit to the economy, this means first time buyers would continue to be locked out of the housing ladder.
If you already own property in north London, you can sleep easier in the knowledge that it should weather the squall and remain a valuable long term asset whichever way the wind blows (witness the stonking recovery in Hampstead after the 2008 financial crash).
“If you’re not under pressure to move my advice is to sit tight,” says Pollack.
“If you have property in London you have AAA stock.”
Darker storms than the referendum are brewing on the horizon of the London property market, but it might just be safer to stay in port than head out to sea alone.
Amid New York City’s luxury penthouses and sprawling duplexes is a stash of secret rooms: one-bedroom and studio apartments that will never appear on public listings or the open market.
These bijoux crash-pads — known as accessory apartments — are available only to elite families who’ve already bought (much larger) homes in the building.
Rafael Viñoly’s cloud-scraping tower near Central Park, 432 Park Avenue, includes such hush-hush assets, as does the West Village’s new luxury complex the Greenwich Lane.
Among that development’s 200 units are six small apartments — starting at around 500 square feet for $1.26 million — and offered for sale solely to existing buyers; four are already spoken for.
It’s a similar setup at NoMad conversion 212 Fifth: Its 48 units include six smaller apartments on the second floor, averaging around 425 square feet and starting at around $875,000.
So what’s the appeal of these tiny, secret apartments?
“The competition to hire, and keep, the best staff — a personal assistant, nanny, butler or house manager — has gotten way more intense over the last 10 years,” explains Caspar Harvard-Walls, a partner at Black Brick in London (where the trend first gained traction). “So the way they are housed has changed enormously.”
In other words, if you want a top-tier Poppins to tend to your precious offspring, she won’t settle for a dank room with a bunk bed; modern Mary expects the same finishes and fixtures as the family home, albeit on a smaller scale.
And there are other motivations informed by the increasingly informal and in-flux lifestyles of typical buyers.
“People often work from home today, so if both spouses are there they might prefer a place they can go to be alone — say, if they’re writing a book,” notes 212 Fifth developer Robert Gladstone. “Maybe they have a kid returning from college who is one of those millennials who needs to move in with their mom and dad.”
Of course, the concept is hardly a new one. In Manhattan’s Gilded Age, buildings often incorporated smaller accessory apartments (mostly studios for staff) tucked just below the roof. It’s the reason there are so many pronounced cornices among developments from that era. While many of these vintage examples have been swallowed up bysurrounding apartments, the strategy is now being revived in luxury conversions and new builds.
These clandestine hideaways — real estate’s version of speakeasies — are quickly becoming a brag-worthy high-end amenity. And once the kids no longer need that practically perfect nanny, there’s no need to downsize — simply sell the spare apartment. As long as the buyer is already a neighbor.
“These apartments are intended as a convenience to owners in the building,” Gladstone emphasizes. “So we do ask that someone doesn’t resell to an outsider.”
The sense of gathering momentum for the Leave campaign ahead of the upcoming EU referendum is causing high levels of uncertainty in the UK housing market, as many ‘nervous’ buyers and sellers adopt a wait and see policy, causing activity in the market to slow and property price growth to cool.
Both buyers and sellers are clearly anxious, as reflected by a noteworthy drop in sales market activity, while landlords, much like the rest of the British public, are evenly divided on how they will vote in the EU referendum, according to research from the National Landlords Association (NLA).
Jo Eccles, managing director at Sourcing Property, reports that the prospect of a Brexit has caused divided reaction amongst buyers, with UK-based buyers falling into two camps.
“Our family clients are buying as normal, whether it’s that they have to move to upsize, or be closer to certain schools. We call these ‘necessity purchases’ and the upcoming referendum has had very little impact on this part of the market,” she said.
“With our other UK buyers, who don’t necessarily need to buy now, they’re also holding off to see what the outcome is,” Eccles (left) added.
According to estate agency Haart, new buyer demand fell by 5% in May, while the volume of agreed transactions dropped by 3.9% as prices rose by just 0.8% month-on-month, down from the 1% rise reported in April.
Haart’s findings are supported by the latest study by the National Association of Estate Agents (NAEA) which shows that demand for residential property across the UK has fallen to one of the lowest levels on record as prospective buyers and sellers postpone investment ahead of the EU referendum.
The latest examining of housing market activity revealed a sharp slowdown in demand for homes across the UK, owed largely to the looming referendum as well as the recent buy-to-let stamp duty changes.
“Should we vote to leave, then this will create ongoing uncertainty as the UK seeks to agree a way forwards with the EU,” said Camilla Dell (right), managing partner at Black Brick.
Even in the new homes market, activity has slowed, with the Berkeley Group the latest housebuilder to report that home reservations have plummeted – down by 20% in the first five months of this year amid Brexit vote uncertainty.
“The upcoming EU referendum means we’ve entered a period of uncertainty, as buyers put off their hunt in anticipation of the result,” said Mark Hayward, managing director, NAEA.
Almost a quarter (24%) of estate agents expect house prices to decrease and a further one in four (23%) expect demand to decrease if Britain votes to leave the EU in June. This view is shared by many homeowners.
Long road to recovery
The majority of Britons who fear that the price of their property will fall if Britain leaves the EU believe that the road to recovery will not always be easy.
A YouGov survey of 1,735 UK adults revealed that 61% of Britons who think that their house price will decrease if Britain exits the EU believe that it will take at least five years for UK house prices to recover from the impact that the change will have on the UK property market and wider economy.
Graham Wellesley, founder and chief executive of Wellesley Finance, said: “These figures show that people across the UK are deeply worried about how their properties will be affected if Britain votes to leave the EU later this month.”
Brexit would put investments at risk
It has been suggested that up to £900bn worth of property investment in this country could be at risk of harm if the UK votes to leave the EU, according to a separate survey of more than 3,000 individual investors.
The study by online equity crowdfunding platform SyndicateRoom assessed how the upcoming EU referendum will affect individual investors and found that almost half of the investments at risk in the event of a Brexit are believed to be in the property market.
“At SyndicateRoom, we want to help individuals increase their net wealth through equity investment – and based on this research, it appears that is more likely and more achievable if the UK remains part of the EU,” said Goncalo de Vasconcelos, CEO and co-founder of SyndicateRoom.
Jamie Lester (pictured), head of Haus Properties, also thinks that a vote to remain should see the property market return to normal fairly quickly, while “it remains to be seen what exactly the impact will be if Britain leaves the EU”.
Either way, he thinks that the market will “stabilise” once the general public is able to “understand and adapt” to the changes.
Room for growth
Regardless of whether or not the UK opts to remain in the EU, Paul Smith, CEO of Haart, believes that the UK, particularly London, will remain a safe haven for property investment, once the uncertainty is over.
“It is the uncertainty around our status in the EU that is causing the market to stagnate, once we know the outcome, regardless of what it is, the property market will become reinvigorated,” he said.
“In the long term, house prices will bounce back once more as the age-old problem of a disparity between the amount of stock available and the number of buyers competing rears its head,” added Smith (right).
His views are supported by the latest survey by the Royal Institution of Chartered Surveyors (RICS), which shows that house prices in the UK are expected to rise further regardless of whether Britain opts to remain or leave.
Despite growing uncertainty ahead of the looming EU vote, many experts still expect to see house prices end the year higher.
Residential property prices are set to increase faster than UK inflation and outstrip average pay gains, making the homeownership dream even harder for the average first-time buyer, a recent Reuters poll found.
But the research does show that the decision to remain a part of the EU or exit the 28-member bloc will impact on the level of capital growth.
If Britain stays in, house prices are expected to rise by 5% this year, the poll of 17 experts taken in the past few weeks found, far outstripping the 0.7% inflation forecast by economists in a separate recent Reuters poll.
Next year and the year after, prices are forecast to increase about 4%, compared with corresponding inflation forecasts of 1.7% and 2%.
In the event Britain votes to leave the EU, prices will almost certainly still rise, albeit at a slower rate of 3.8% this year, but stay flat in 2017 before picking up 2% in 2018, the Reuters poll found.
The poll of experts pours scorn on the Chancellor George Osborne’s claim that a vote to leave the EU would have a ‘major hit’ on residential property prices across the UK.
Doomsday predictions
The scare tactics being adopted by the government to keep Britain in the EU has seen the Chancellor warn about the short-term impact of Brexit, insisting that property prices could drop significantly if voters opt to leave the EU on 23 June.
He recently insisted that a UK exit from the European Union could cause house prices to nosedive.
Property prices have been at the forefront of the EU debate in recent weeks, with the Chancellor claiming that the value of homes in the UK could fall by as much as 18% following a Brexit vote.
Based on the average price of a home in the UK, Osborne’s forecast suggests that the average residential property could fall in value by more than £50,000 within two years of the vote in comparison with what it would be if the UK stayed in the EU.
But some say that Osborne’s predictions are rather bold, given that there is a severe housing shortage in this country.
Nevertheless, the reality is that there is nothing that spooks markets more than uncertainty, as was evident in the run-up to the Scottish referendum in 2014, when the housing market north of the border ground to a virtual halt.
“These have been turbulent times and uncertainty is the very thing that the property market hates,” said Saul Empson from Haringtons UK.
Empson (left) believes that if Britain votes to stay in Europe, “we are likely to get more of the same property market that we have had – more people coming into London than leaving, fewer properties for sale thanks to George Osborne having raised the transaction costs to punitive levels”.
“If we leave, this is unknown territory, and the only certainty is that Nigel Farage, Boris Johnson or George Galloway don’t know the answer.”
“So from a purely property point of view, we’re swapping Donald Rumsfeld’s ‘known, unknowns’ for ‘unknown, unknowns’. And that is without asking the question as to what effect President Trump might have on the world.”
Last month, the chief executive of Virgin Money, Jayne-Anne Gadhia, also warned that a Brexit could place downward pressure on property prices in the UK, especially in the capital, not to mention push up interest rates.
She told the press that a vote to leave the 28-member bloc in the looming referendum could lead to a sharp drop in the amount of foreign investment into London’s property market from abroad.
“My personal view is that property prices would be likely to come down, as inward investment, particularly in London, is less available,” she said. “The risk on a Brexit is I think that property prices come down and interest rates go up.”
Britain will survive outside the EU
Despite concerns that a Brexit will have an adverse impact on the housing market, many property experts, such as Trevor Abrahmsohn at Glentree Estates, believe that the UK housing market will do well outside of Europe.
“I think that the chancellor must believe that the British electorate have all just ‘come off the onion boat’ and that we are too stupid to make sense of what is going on,” he said.
“The government is blaming every element of bad economic news on the Brexit campaign.”
While accepting that trying to second guess which path the property market will take off the back of the political landscape is “purely speculative”, Brendan Cox, managing director of Waterfords, does “not foresee any immediate change in the market” in the event of a Brexit.
“A British exit from the EU could take a decade to negotiate and research suggests that the process will be long and uncertain,” he said.
However, if the UK were no longer tied to EU regulations and attracted more local investment, “the property market could also benefit”, added Cox (right).
He continued: “Forecasters warn that house prices could fall by up to 25% if we exit the EU, but others argue this would bring prices to a more ‘sustainable’ level in relation to disposable income, which would also provide greater opportunity for first-time buyers.
New housing supply
While a Brexit may present would-be purchasers with fresh opportunities, especially those seeking a first foot on the housing ladder, some experts fear that an ‘out’ vote will have a devastating impact on the UK economy and reduce the level of new housing supply, as many housebuilders will be less willing to commit to new projects due to the uncertain economic climate.
Andy Hill, chief executive at housebuilder Hill, commented: “A Brexit would have severe consequences for the British property industry and economy in general. As Europe’s largest powerhouse, our economy is very much strengthened by our position within the EU, which brings numerous benefits that largely outweigh the costs. Exiting this arrangement will likely result in a largescale slowdown that I believe will take many years to recover from.”
The government’s target of building 1m new homes over this parliament will also become an unrealistic one, according to Hill.
“It is widely acknowledged that we need to build more homes more quickly, with more than 1m required by 2020. Without investment coming into the UK at current levels however and demand diminishing significantly, developers would likely pull away from building more homes and this figure will be incredibly difficult to meet.”
Chris Nelson, co-founder and partner of Cumbria- based developer egg Homes is also of the opinion that the UK shouldn’t leave the EU, “ because our economy is not strong enough to handle all of the implications that could come with the decision”.
“There will, without doubt, be an immediate financial impact following an exit, across all sectors of the construction industry,” he added. “Perhaps long-term, once new trade deals and agreements are put in place with individual European countries, and this could take years, things should go back to normal and we could even be in a stronger position, but the immediate impact is too big a gamble in my opinion.”
Skills shortages
The single biggest challenge for housebuilders is the lack of skilled workers in the UK, and Bob Weston (right), chairman of housebuilder Weston Homes, fears that that an exit from the EU will “exasperate the problem”, if it restricts free movement of people across Europe.
He commented: “Some 80% of the people working on our sites inside the M25 are not of British decent and 60% outside the M25. Who is going to build the extra 100,000 new homes a year that the Government says we need?”
Tony Pidgley, chairman of the Berkelely Group, has also offered his support to the pro-European campaign.
“The outcome of the referendum on Britain’s membership of the European Union is significant for the UK’s housebuilding and property sector,” he said.
“Berkeley supports a vote to remain in the EU. London’s status as the world’s best big city is underpinned by labour mobility, cultural diversity and a constant influx of talent and investment from around the world, and the UK economy in turn is powered by the success of our capital city.”
Summary
While uncertainty has certainly suppressed activity in the housing over the last few weeks, the good news is that the EU referendum has been a relatively short campaign, compared to say the Scottish referendum two years ago.
In the longer term, solid arguments can be made on each side, but regardless of whether the UK votes to stay in or out of the 28-member bloc, the fact is that there is a severe housing shortage that will almost certainly drive home price up further in the medium to long term, but the rate of growth may very well hinge on the outcome of the vote.
“In the run up to the referendum, we are seeing two types of clients. Some clients are very aware of a potential Brexit and the uncertainty that surrounds the referendum. They therefore want to put their search on hold until the result is known. We have other clients who couldn’t care less. They want to buy, and buy now, and actually see the uncertainty surrounding the referendum as a good opportunity to get a better deal on their London property. The uncertainty is also having an effect on sterling, making London property cheaper for foreign buyers.
“Should we vote to leave, then this will create ongoing uncertainty as the UK seeks to agree a way forwards with the EU. Sterling may weaken even further, again, making London property very attractive to foreign buyers.
“Should we vote to stay in, normality will return to the market straight away and we may see a pickup in transaction volumes as a result of pent up demand from buyers that were waiting in the wings.
“In general terms, London is going to retain its attractiveness to wealthy international buyers regardless of whether the UK remains in the EU. Its cultural attractions, geographic location, legal system, and concentration of talent mean that there will always be demand for prime central London property.” – Camilla Dell
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The aim of the initiative is to identify, recognise, introduce and promote the Top 25 Residential Property Buyers acquiring prestigious residential property for high net worth and ultra high net worth clients. Approximately 65 Residential Property Buyers are surveyed and the Top 25 is based on data received on areas such as number of directors, number of buyers, the number of staff, fee structure, fee income and the company selling policy. The Top 25 firms are selected using this data and the six key areas are published on www.eprivateclient.com.
So you’ve spent months searching for the perfect property investment and transforming it into a modern, comfortable home. Now it’s time to hand over the keys to a perfect stranger and hope they pay up. Or perhaps you’re upsizing and you’re hoping Mr Rando won’t destroy your beloved first home. But how can you be sure, really? If you’re going it alone, or you want to make sure your letting agent is up to par, here are some tips from the professionals who find reliable tenants every day.
Target the right tenant
“Tailor the look and feel of your property, and set the rent to suit your target market. If your property offers lots of space and is close to reputable schools or nurseries it is likely to appeal to a family, possibly with young children, and they will enjoy the freedom to make the house a home. What about a young professional? Likely to have a little bit more money to spend, they’ll be after a modern property that’s well placed for transport links, bars, cafés and entertainment. Regardless of the tenant profile, keep the décor simple – don’t show too much of your personal taste. You may like bold patterns, but your dream tenant might not – you don’t want to put them off.”
– Nick Vincent, Lettings Director at Proctors estate agents
Carry out some basic checks
“To find high quality tenants, we take references from their previous landlords to show that the tenants’ paid rent on time and they didn’t cause any damages. We also contact their HR department to confirm employment and then also ask for supporting documents from the tenant in the form of a payslip or signed contract. Finally, we ask them to provide us with a copy of their passport by bringing it into the office in order to make sure they pass Right to Rent checks.”
– Jake Willis, co-founder of London Shared
Be aware of Right to Rent
“Following the implementation of the Right to Rent scheme across the UK, a landlord or agent also needs to ensure the tenant has the right to reside in the UK. The requirement is ensuring that an original passport/VISA/residence permit is seen in the present of the tenant and known occupants. If an individual is a UK citizen, EU or EEA national, then they will automatically have the right to reside within the UK. These documents are only required to be valid at the commencement of the tenancy. Should either expire during the tenancy, then the landlord/agent should follow it up.”
– Neil Short, head of city residential at JLL
Use your gut feeling
“A tenant’s behaviour during viewings can be really telling. If they turn up late, they’re rude, and they point out every tiny part of the property which isn’t perfect, it may be a good indicator that they’re going to be quite a demanding tenant. Ask the letting agent how the tenant came across. Even if they’re offering the most money, you may decide that their attitude simply isn’t worth the extra £50 per week or so.”
– Jo Eccles, managing director at Sourcing Property
“Most tenancies that do go wrong, do so before the contract is even signed. By this, I mean that either the estate agent or the client have neglected to act on signals that a prospective tenant may not be up to par. The process of renting in London is relatively straightforward. It can be a red flag if a tenant makes this process complicated.”
– Tim Hassell, managing director at Draker
Meet your tenant face-to-face
“Try to actually meet your prospective tenants; as much as an agent might paint a very good picture of anyone who wants to rent your property, I’ve always felt that it’s good to put a face to a name. In my past experience, the tenancies where this has happened have always gone smoothly as people feel like they know who they are dealing with.”
– Anton Neil, senior lettings manager at Haus Properties
Make sure they can afford it
“As a guide, their annual household income should be at least 30 times the monthly rent if they are to comfortably pay the rent each month. Other factors to consider are the length of their current employment – this should be for at least the length of the tenancy so they can demonstrate a continued, fixed salary.”
– Chris Boswell, east London lettings director at Johns & Co
“Affordability is key; a stable tenant needs to be living comfortably, not over-stretched so we make sure that household income is at least double the rent.”
– Sophie Lau, head of sales & marketing at Fizzy Living
“Make sure that you see the reference checks that the agent you appoint carries out. It might seem like an obvious one, but a lot of agents do not show these reports to their landlords and they contain a lot of important information, such as credit score, credit history, as well as the questions asked to the previous landlord and the employers.”
– Anton Neil, senior lettings manager at Haus Properties
Especially if they’re from overseas or self-employed
“A frequent obstacle in the prime central London lettings market is that many prospective tenants relocate from overseas, which means they do not have any history in the UK. The best place to start is to check whether they are relocating with a company, who will act as guarantor, or whether they are moving on their own. If the tenant is self-employed and does not have a UK accountant who can verify and quantify their annual earnings, we would advise landlords to ask for payment in advance of the tenancy.”
– Tracey Cumming, head of lettings at Jackson-Stops & Staff
Be flexible for the perfect tenant
“Many landlords make the mistake of playing ‘hard ball’ with the rental price; their property is often not in optimum condition, and they can forget that the incoming tenant is paying rent to stay in the property. It is paramount to remember that a tenancy is a ‘two way street’ and a mutual respect between a landlord (and their agent) and tenant is crucial to ensure both parties work together to maintain the property.”
