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Is it too early to get rich from Crossrail 2?

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.

Trouble ahead: what Brexit could mean for the north London property market

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.

View the article online here

Rich people are buying secret luxury apartments for the help

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.”

View the article online here

What will happen to the housing market if Britain leaves the EU?

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.

View the article online here

MY BEST ADVICE: what would Brexit mean for the property sector?

“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

 

 

ePrivateclient – Top 25 Residential Property Buyers 2016

We are thrilled to be included in the 2016 eprivateclient Top 25 Residential Property Buyers for a third year.

Eprivateclient is the leading website and news service for private client practitioners, including lawyers, accountants, trustees and fee-based IFAs.

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.

Top tips for choosing the right tenant for your buy-to-let investment

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.”

– Sophie Amasha, property manager at Black Brick

Why buyers in London’s Clapham are staying put

When the author John Lanchester was writing Capital, his 2012 novel about London’s spiralling property market, he chose to set it in Clapham in 2008. There, house prices were rocketing as quickly as his characters’ lives were unravelling. However, by the time the BBC adapted the novel last year, Clapham was no longer suitable, it seems. The film-makers transposed the drama to still-gentrifying Balham and Tooting. By then, Clapham had arrived.

“The best addresses in Clapham have joined the £1,000 per sq ft club,” says Robert French of Knight Frank.

“It’s something that people aspire to join.” According to French, the best streets in this part of south-west London are The Chase, Macaulay Road, Old Town and Clapham Common North Side, which, he adds, have been teetering on the £1,000 price point for some time.

The larger homes on Clapham Common West Side have also reached this price level, says Robin Chatwin of Savills. “A view over the common will add a 5 to 10 per cent premium over properties in adjoining streets.”

Clapham used to be thought of as a “stepping stone before a move out to the country”, says Sophie Chick, associate director of residential research at Savills, but today it attracts buyers who want to put down permanent roots. Chick says more than half of Savills’ buyers and tenants in Clapham in 2014 and 2015 moved from within the area.

The smattering of smart restaurants, bars and cafés along Clapham High Street, combined with access to large green spaces, is making buyers question their desire to move on, says Philip Eastwood, partner at The Buying Solution. “There is also the concern that continued London property price growth means that a move out of the city might well mean you can’t buy back in.”

Not even schooling drives Clapham-based families to up sticks these days. In fact, many families move to the area for its high-performing state primaries such as Honeywell and Belleville, or independent schools Broomwood Hall and Eaton House.

Some homeowners decide to pack their children on the train to Surrey for day schools, says Robin Chatwin of Savills, then “the parents have an easy commute to the City”.

The increased stamp duty on homes priced at more than £937,500 is also encouraging more homeowners to stay put. “We are seeing a lot of families enlarge their properties through basement digs and loft extensions,” says Eastwood. “Ultimately, this reduces the number of properties on the market, which keeps prices high.”

Despite rising prices, some of Clapham’s neighbours are still making it look like good value. According to French, Battersea is 25 to 30 per cent more expensive. “The huge development around Nine Elms is driving values up there,” he says.

The price difference is more marked when comparing Clapham with prime markets north of the Thames. Savills estimates a quarter of Clapham’s buyers come from one of three boroughs: Kensington and Chelsea, Hammersmith and Fulham, and the City of Westminster.

“We are arriving on people’s search lists that we would never have been on before,” says French. “We’re seeing people who say they are searching between Chelsea and Marylebone, then they buy in Clapham Old Town.”

Knight Frank is selling a 3,305 sq ft, six-bedroom house on Orlando Road, just off Old Town, for £3.29m. Savills, meanwhile, is marketing a five-bedroom, semi-detached house on Clapham Common West Side for £3.3m.

What sets Clapham apart from most of central London — and neighbouring Battersea, for that matter — is its buyer demographic. While in the rental market Australians are a prominent bunch, increasingly family owner-occupiers are replacing them, says French — and they’re mostly British. “I’d say 90 per cent of buyers in Clapham Old Town are now British,” he says.

Prices cannot rise indefinitely, though. Some agents feel the slowdown in central London will start to affect Clapham and its neighbours — and sooner rather than later. “Prices in the best areas of prime central London are down 7.5 per cent since the 2014 peak and it’s my belief that what starts in [the centre] will filter out into outer-prime London, which includes Clapham,” says Caspar Harvard-Walls, partner at Black Brick buying agency. “By the end of 2016, I expect the best stock in these outer-prime locations will have seen a price drop of up to 10 per cent.”

If that is the case, perhaps John Lanchester might consider returning to Clapham in a few years’ time for a Capital sequel.

Buying guide

In 2015, the average home sale price for Clapham, Battersea and Wandsworth was £728,000—a third higher than the Greater London average

The most expensive area is between Clapham and Wandsworth commons, which is the only ward in Clapham with an average sale price of more than £1m

Clapham is within the boroughs of Wandsworth and Lambeth. The former, has one of London’s lowest council tax rates. Lambeth has one of the highest

What you can buy for . . .

£500,000 A two-bedroom flat

£1m A two-bedroom unit in a new-build

£5m A six-bedroom family home overlooking Clapham Common

Red-Hot Property Markets Cool as Rich Investors Retrench

Demand for high-end homes in London, New York slows as market turmoil hits global investors

LONDON—In August 2014, when the housing market here was on a tear, a two-bedroom condominium in one of the most expensive neighborhoods went up for sale at £3.25 million ($4.64 million), a 67% premium to its purchase price six months earlier.

The redbrick home on Cadogan Gardens in Knightsbridge is still unsold, and expectations have been revised. The price has been cut three times, the latest at the start of this year, to £2.5 million.

“It’s a great property,” said Sam Spring, a sales broker at the Chelsea office of estate agency Faron Sutaria, of the 1,250-square-foot home with dark walnut floors and high-end appliances. “It’s just a very price-sensitive market these days.”

In London’s priciest neighborhoods, the housing boom is over.

Wealthy investors, most prominently from Russia, China and the Mideast, swooped in on cities like London, New York and Vancouver to buy high-end homes in the years following the 2008 financial crisis. Real estate appeared to be a safe investment. Returns looked robust against ultralow interest rates.

Now, demand is slowing not just in London, but in prime housing markets around the world.

Average prices of luxury homes in 10 global cities analyzed by real-estate broker Knight Frank LLP are expected to rise 1.7% this year, down from 3% growth in 2015.

Foreign investors that helped drive the boom have had to contend with weakened currencies, stock-market shocks and the collapse in oil prices. Meanwhile, a major overhaul of a U.K. transaction tax known as stamp duty increased the charge on high-price sales, and new taxes on second homes and rental properties will take effect this spring.

In New York, demand for high-end homes cooled last year, brokers said. In Miami, South American and European buyers could pull back this year due to a stronger dollar, and prices are expected to fall in Hong Kong, Singapore and Paris, Knight Frank said. Swiss lender UBS Group AG said in October that housing markets in Sydney, Vancouver, San Francisco and Amsterdam appear “significantly overvalued.”

Luxury housing in London became one of the world’s hottest assets. But “the frenzy is gone completely,” said Manish Chande, senior partner at U.K. real-estate firm Clearbell Capital LLC. About 18 months ago “everything was going like hot cakes. Today it’s the total opposite,” Mr. Chande said.

Prices in prime central London, which includes high-end properties in posh districts like Mayfair and Chelsea, fell 1.4% during 2015, according to data-provider Lonres. Some neighborhoods fared worse. In Knightsbridge, prices dropped 5.6% in November compared with the year earlier, according to broker Knight Frank.

Those slides may understate what is going on: Data on high-end homes are hard to compare, because there are few of them and sellers may have the wherewithal to simply hold off rather than accept a lowered price. Transaction volumes at the top end of the London market were as much as 40% lower in December from a year earlier, according to U.K. buying agent Property Vision, and inventories of prime properties are mounting.

The standoff between buyers and sellers resulted in 2,712 homes over £1 million for sale in prime central London at the end of November, 81% more than in January 2014, according to buying adviser Huntly Hooper Ltd.

Even so, in a sign of the liquidity crunch, the gap between asking prices and sales prices is widening.

The difference between initial asking prices and average sales prices in prime central London was at a record 19% in the three months to November, Huntly Hooper data show. The disparity was 9% in the same period last year.Cadogan Gardens—four streets ringing a shared garden—sits on the Cadogan Estate, a 93-acre central London plot that has been in the same family for nearly 300 years.

The estate is on the border of Chelsea and Knightsbridge, parts of London now synonymous with fancy cars, luxury shopping and high-price penthouses.Its origins are noble. The English aristocracy once had summer palaces around the fields and marshes of Chelsea. In the 1770s, the first large-scale housing development started when Charles Sloan, the Earl Cadogan, granted a lease to architect Henry Holland to build terraced homes for moderately affluent people.In the 1800s, the area started to be swallowed by expanding London. Sloane Square tube station opened in 1868. Much of the Cadogan Estate was redeveloped in the late 1800s after falling into decline.Last year, just a quarter of the 34 homes put up for sale on Cadogan Gardens sold, and almost half were taken off the market, according to Nathaniel Wilde,head of the Sloane Square office for estate agent Hamptons International. On Eaton Place in neighboring Belgravia, home to billionaires and diplomats, only a quarter of the around 50 homes offered were sold, he said.It was a “tough year on that patch,” Mr. Wilde said. “Lots of homes are still sitting there.”The Cadogan Gardens condo for sale at £2.5 million was last sold in February 2014 for £1.95 million, according to Land Registry records. The property developer selling the condo has been renting it out, Mr. Spring said.

Superrich buyers from countries in the Mideast and Asia helped drive prices higher. But financial circumstances in those countries have changed drastically in the past year.

Oil prices, slipping under $30 a barrel, are about half the price they were in May. Demand from some investors in oil-producing countries around the Middle East and Africa has waned, property agents said.

Mideast investors made up 4% of prime central London buyers last year, compared with 15% in 2014, according to data from broker Savills PLC.

Weaker currencies have kept investors in Asia and other emerging markets at bay. The portion of buyers from the Pacific-Asia region fell to 2% in 2015 from 4%, Savills data show. In China, stock market routs amid concerns about economic growth have had an impact on buyers. Most investors from China have focused on new-build properties away from London’s historic center, agents said.

In New York’s high-end property market, the Federal Reserve noted “softer demand and a supply glut” in its December regional survey of economic conditions known as the beige book.

“There has been a dramatic slowdown at the superluxury end of the market,” said Andrew Gerringer, managing director of the Marketing Directors, new-development consultants. “When you see what’s happened in the financial markets it just puts a bit more of a chill.”

In the 90-story One57, just a couple of blocks from Central Park, a four-bedroom condo purchased by a European investor for $20.3 million in April recently sold for $17.75 million, according to the broker, James Cox of real-estate firm Compass.

While overall the New York real-estate market remains strong, Mr. Gerringer said that demand for trophy properties over $20 million has cooled substantially over the past year, and there has been some impact on the $5 million-$10 million market.

 

At 50 United Nations Plaza, which has views of the Empire State Building, the developers, Zeckendorf Development LLC and Global Holdings Inc., said they cut prices by 5% on some units, although they said less expensive units on the lower floors have sold for close to the asking price.

In Sydney, upscale home prices raced 15% higher in 2015, according to Knight Frank. But growth is expected to slow to 10% this year.

Rich Simeon, director of real-estate firm Simeon Manners, is waiting to see if the recent China stock market shakeout chokes off demand from Asian buyers. “It is too early to tell what is going to happen right now,” Mr. Simeon said.

Jo Eccles at London buying agent Sourcing Property said foreign buyers made up half of her business over a year ago. But now the vast majority of her clients live in London, with many working at investment banks. “The demographic has changed massively,” Ms. Eccles said.

Access to capital has also become increasingly difficult for foreign buyers exposed to falling oil prices, said Camilla Dell, managing partner at buying agency Black Brick. She said wealthy buyers from oil-rich African countries like Nigeria have struggled with liquidity in the past six to 12 months.

In the U.K., the change in stamp duty in December 2014 made homes valued over £937,000 more expensive for buyers. Stamp duty charges rise in steps to a maximum of 12% on the portion of sales over £1.5 million. The previous regime charged a flat rate based on the value of the home, with the duty rising to 7% on homes over £2 million. Last year, to compensate for the change, some sellers adjusted their prices lower, agents said.

Wealthy buyers can generally afford the outlay, said Alex Newall, managing director at Hanover Private Office. But the new tax has made people wanting to trade up to a bigger home hold off on transactions, “instead opting to do renovations or additions to their existing properties,” he said.

While the prime central London market is stuttering, prices are still pushing higher in the rest of London amid a housing shortage. The average dwelling in November sold for £506,724, up 11.2% from the year before, according to Land Registry data.

Adding to demand are buyers that a few years ago would have focused exclusively on prime central neighborhoods. For instance, some wealthy Middle Eastern buyers have started to see better value in new-build projects away from the center.

“These clients are now willing to look 10 miles out,” said Jo Leverett, head of international residential markets at estate agent Cluttons LLP. “That’s new.”

Overall, London has become drastically less affordable. When UBS warned in October that the city was at risk of a housing bubble, it noted that real earnings have fallen 7% since 2007.

“We’re due a price correction,” said Robert Nichols, managing director at London estate agent Portico. “When you can’t think of anyone who can afford to live on your street, you know there is something wrong.”

For now, areas dependent on the superrich are the ones suffering.

St. George’s Hill, a gated community in the suburbs of Surrey, became popular with wealthy Russians during the boom.

Now, around a quarter of the over 400 homes in the area are for sale or set to come onto the market, according to Hanover Private Office. Just 13 homes were sold there last year.

Wealthy Russians have pulled back from the London market amid international sanctions, the depreciation of the ruble and political pressure to rein in foreign spending, buying agents representing Russians said.

Saddle Stones, a six-bedroom mansion in St. George’s Hill, was listed in August 2014 at £9.5 million. The asking price is now £7.5 million. The home, complete with a cinema room, elevator and swimming pool, was designed with a Russian buyer in mind, said Natalia Rotenberg, founder of design firm NR Group.

Ms. Rotenberg said homes in the area remain for sale despite lavish parties thrown for potential buyers. “We’ve won awards for our interiors. But they still don’t sell,” Ms. Rotenberg said in a September interview.

Stamp duty changes: buy-to-let investors competing with first-time buyers creates a ‘mini-bubble’ in the London property market

London’s beleaguered first-time buyers are facing a fresh challenge: an onslaught of investors swooping on property in a rush to beat an increase in stamp duty for buy-to-let homes scheduled for April 1. Sealed bids are back and cash is king if you want to close the deal.

According to Connells estate agents, the number of buy-to-let valuations carried out in December leapt 86 per cent year-on-year after Chancellor George Osborne announced the tax hike in his Autumn Statement.

Buying agent Garrington reports registering 38 per cent more buy-to-let clients so far this month compared with January last year.

The unforeseen impact has been what buying agent Sara Ransom, director of Stacks Property Search, described as a “mini bubble” as investors rush to buy property before the deadline, hiking prices and increasing competition for first-time buyers already struggling with tough mortgage conditions and high deposit demands.

“Most popular are flats and small houses priced between £300,000 and £450,000, which appeal to first-time buyers and investors alike,” says Jeremy Leaf, principal at Jeremy Leaf & Co estate agents. “Consequently, prices for this type of property are hardening.”

Some less-reputable estate agents are said to be ignoring best practice. First-time buyers are telling Homes & Property that agents are finding it so easy to sell property, they fail to attend booked viewings and will only accept sealed bids with no negotiation. Even when prospective buyers do make the highest bid, it is claimed they are often thwarted by investors making last-minute cash offers.

One first-timer told us she put in a “final offer” having been advised by the agent how much to bid to be successful, only to discover the agent had organised more viewings for the next day. She was outbid by someone in the second wave of viewings.

In Surbiton, Amy Claydon, branch manager of Leaders estate agents, said investors are on the hunt for one- and two-bedroom flats priced between £250,000 and £450,000. One recent contest over a flat was won by an investor because, said Claydon, her vendor was impressed by their “urgency to purchase in the next eight weeks, compared to a first-time buyer having no deadline to work to”.

Buying agent Caspar Harvard-Walls, partner at Black Brick, agrees investors’ ability to move quickly is putting them in the driving seat when it comes to sealing a sale — particularly if they can pay cash. “The other issue from the first-time buyer’s perspective is that the agent might prefer to sell to a buy-to-let investor as they could benefit from letting and managing the property on an ongoing basis,” he added.

Another issue is the “greenness” of first-time buyers. Barclay Macfarlane, head of Strutt & Parker’s Fulham branch, said nervy novice buyers sometimes let sales slip through their fingers. “I handled a sale where a cautious first-time buyer was put off a purchase because of some damp that was picked up in a structural survey — an experienced investor was offered the contract and completed the purchase in just 10 days,” he said.

The good news for first-timers is that experts agree the current situation is a temporary one. “The balance of power should shift toward first-time buyers after April, as demand from buy-to-let investors recedes,” said Paul Smith, chief executive of Haart estate agents.

Jonathan Hopper, managing director of Garrington property finders, agrees that buy-to-let demand will “fall away”. “With many existing landlords likely to start selling up in the run-up to next year’s reduction in mortgage tax relief, much more stock will come on to the market,” he added.

And Sam McArdle, investment property buyer at The Buying Solution, believes there might be particular bargains to be had in the new-build sector, where about 60 per cent of homes have historically gone to investors.

“It is most likely that this market will be hit hardest,” he said.

But while this could mean widespread discounting on new homes in the short to medium term, he believes period homes — “where first-time buyers and owner-occupiers living and working in the city are and always will be transacting on” — could be a safer investment for buyers.

Fit for a King

If January has been a dry one for you so far, it’s okay, you’re on the home straight; there’s less than a week, or about half a million seconds, to go.

But it seems we aren’t just fair – (or freezing-) weathered friends of a health fad. Fitness is becoming a major focus for London’s luxury developers. It’s no longer acceptable to plonk the pool and gym in a sweaty basement. Now they dangle trophy pools between towers (see Ballymore’s Embassy Gardens) and dedicate prime upper floor space to treadmills with a panoramic view.

Never ones to shy away from a show-stopping swimming pool, Berkeley have gone to town at the Foster + Partners-designed South Quay Plaza, where apartments cost from £599,950. There’s a 9,000 sq ft health club with “dry” and “wet” sections, so you can cover all your spa and cardio needs before taking a dip while overlooking Canary Wharf through vast double-height windows.

There’s also Berkeley St George’s London Dock near Tower Bridge – prices from £869,950 to £3.5m, which provides a touch of bling while you swim with a gold-tiled wall running along the pool’s edge and a spa reception and treatment rooms to out-do any five-star hotel spa.

London Dock also has one of the city’s only “residents only” squash courts – something that 37 per cent of us say we’d like in a new development, according to a recent survey by CBRE, who are marketing London Dock.  Having a gym is the top demand (76 per cent), a pool is as popular as a private garden (69 per cent) and 46 per cent of us would like a spa.

The amenities that developers choose are also a pretty good pointer of who your neighbours might end up being. Winding down for residents at Queen’s Wharf in Hammersmith – where one-bed flats start at £715,000 – means soaking up serene river views from the rooftop yoga terrace on the roof. But at Keybridge in Vauxhall – where one-beds cost from £675,000 – stress relief will come from the boxing gym in the basement. It’s the difference between those who want to “keep fit and switch off” and those who need to “burn off steam”, says Rosie Nesbitt, sales and marketing director at FABRICA, the co-developer of both projects with Mount Anvil.

Developers are also latching on to the fad for al fresco fitness. Barratt London have what must be the city’s most scenic outdoor badminton court, along with an outdoor gym, table tennis and chess tables, at Fulham Riverside, where one-bed flats cost from £796,995.

And in east London, City Road’s target demographic of young techies and City types has lead Berkeley Homes to provide a boot camp terrace at 250 City Road. “It will appeal to buyers who work long hours and it engages with the growing trend of exercising outdoors – away from crowded parks, pavements and cycle paths – after a day spent confined to a desk,” comments Piers Clanford, MD at Berkeley Homes (North East London).

Down the road at No. 145 is The Atlas Building, where the developers Rocket Investments feel buyers will want a swim with a view, with full-height windows along the length of the pool. Flats cost from £628,000 to £5m for the duplex penthouse. “Having high-quality lifestyle facilities is becoming an important differentiator in the luxury residential market. Buyers are increasingly focused on well-being,” says Andrew Hawkins, Rocket Investments’ director.

Meanwhile, Islington Square – Sager Group’s £400m redevelopment of the old North London Royal Mail centre near Upper Street, with flats costing from £715,000 to £1.79m – has gone for trendy branding by signing up Third Space to take over its fitness club.

It won’t just be typical Third Space trendies who sweat their stuff here, but families too as this will be the gym’s first Family Club, with children’s training space among the facilities on offer, plus some of London’s most designer changing rooms. Third Space’s CEO Colin Waggett describes it as “part of our vision to redefine London’s fitness club landscape”.

Just as high-end apartments are starting to look like the swankiest hotels, so must the facilities, thinks Camilla Dell, managing partner at Black Brick buying agency. “Residents at the Corinthia Residences in Whitehall Place have access to one of the largest spas in Europe, spread over four floors with 17 treatment rooms, a vitality pool, amphitheatre sauna, ice fountain, marble heated loungers and private sleep pods,” Dell comments. You can buy one of those Corinthia apartments, incidentally, for £11.425m through Savills or Knight Frank.

Dell also mentions Television Centre, the new development at White City, which will have a 20,000 sq ft gym for residents and paying members, along with a Soho House hotel and members club with a rooftop pool. “Developments are becoming more like ‘destinations’ for outside visitors as well as property owners,” she says.

For some, though, keeping fit is more of a theoretical pursuit. As Jo Eccles, managing director of Sourcing Property, recalls: “We recently searched for a property for one young client who insisted on having a gym in her building but rejected any property that required climbing stairs”. Bet she’s counting down the minutes until the end of Dry January.

Where to buy in 2016

Two words are destined to sum up the prime London market in 2016: stamp duty. Faced with paying 12 per cent stamp duty to upgrade, owners of £1.5m+ properties are voting to stay put and improve.

Sophie Rogerson, co-founder of the private property office RFR – recently described by Tatler as “London’s hottest property consultants” – puts it in terms that will hit home to the super-rich. She calculates that the £213,750 you’d spend on buying a £6m home (that’s the cost of, say, a new three-bed flat at Chelsea Creek or a five-bed townhouse in Connaught Square) is the equivalent of 15 years of family holidays or the price of educating a child privately and through university.

David Adams, managing director of John Taylor estate agency, is seeing wealthy Londoners buy up French pads rather than upgrade in the capital. “The taxes here now make France look competitive. The threat of mansion tax killed interest among French buyers in London, but the tap has been turned on again for British buyers on the Cote d’Azur and ski resorts such as Megève and Courchevel,” he comments. For London’s prime market next year, he thinks: “The very top end will hold, but I expect a price correction of 15 per cent for the £3m-£20m market and the £2m-£3m will stagnate.”

That’s not all on the stamp duty front. In April, the three per cent stamp duty hike on buy-to-let properties and second homes comes into play. Until then, we could see a surge in investment. After that, well, “without appearing overly gloomy, it could be another nail in the coffin,” comments Andrew Langton, chairman at Aylesford International. “The residential market has taken too much of a bruising during this Tory government with SDLT, ATED tax [on company-owned UK property] and the latest penalties on buy-to-let tax relief. We’re also being warned of a possible rise in interest rates in 2016 that could trigger massive price reductions.”

New developments with prized, one-off, often waterfront location – such as One Tower Bridge in 2015 – won’t struggle to sell. Chelsea Waterfront, where two-bed flats start at £1.55m through Savills and Knight Frank, is selling fast without offering any discounts or incentives. Other developments to look out in 2016, thinks Camilla Dell of Black Brick buying agency, are Chelsea Barracks, 20 Grosvenor Square and, outside of traditional prime central London, the huge Television Centre development in White City.

“We may also see some ‘fire’ sales at developments such as Battersea Power Station,” says Dell. “Much of Battersea was sold off-plan in Asia to buyers who have been hit hard by weakness in their local currencies, making London unaffordable.”

Meanwhile, Mayfair – thinks Simon Barnes of H Barnes & Co – will be the focus of all attention in prime central London in the coming year. “With Brockton Capitals’ plans for the extensive redevelopment of Curzon Street, Finchatton’s plans for Grosvenor Square and British Land’s newly launched Clarges development – which is already achieving premium prices – this postcode will be the magnet for super prime property,” he comments. “Planning has also just been granted for John Caudwell’s scheme in Audley Square, which looks set to become a landmark address in London.”

And with London’s top tier new developments already offering every concierge service and five-star hotel-style facility on tap, where will developers go next in trying to lure wealthy buyers? “Tech spec” are the buzzwords according to Andrew Hawkins, director at Rocket Investments, which is building Shoreditch’s 40-storey Atlas Building. “High-speed broadband is a must in new luxury developments and more online concierge systems will be introduced to complement the personal services,” he thinks.

John Morley, founder of Johns&Co, which specialises in marketing new London developments, predicts our attention will be focused on making our wheels feel more at home. “Developments where you can drive your car into an elevator and park next to your apartment is definitely a trend to watch out for among luxury buyers,” he says.

Luxury overseas

High-end Spain – Mallorca, Ibiza, Barcelona and Marbella – will be prominent in 2016. They are still buyers’ markets, but genuine luxury new developments in prime locations are scarce and buyers are ready and waiting. “I think 2016 is going to be Barcelona’s year. For the first time since the city became a ‘must go’ destination, there is going to be a wide range of good quality residential new development coming on the market,” comments Alexander Vaughan, founder ofLucas Fox estate agency.

The PGA Catalunya Resort, north of Barcelona, also reports rising interest among British investors who would otherwise have bought a London buy to let property but have been deterred by the rise in stamp duty rates.  Athena Advisors predict a similar trend among British investors in Paris, Madrid and Lisbon, where prime property is a third of the price of its London or Paris equivalents and where luxury brands are moving in.

Further afield it’s all about safety. Barbados scores highly on that count, says Jeannie Mahon from Knight Frank Barbados, and the island is seeing growing demand in the $10m market (Mahon has just sold the waterfront Four Winds villa for $35m) and also for $1.5m+ lock up and leave properties on resorts such as Royal Westmoreland.

Mauritius also gets the safety vote. “It’s widely seen as the safest African nation and it’s fast becoming a financial hub that’s a popular destination to invest in for holidays, lifestyle or retirement, with attractive yields and tax benefits,” comments Robert Green, managing director of Sphere Estates, which is marketing plantation-style villas at Villas Valriche from $659,000.

For 2016’s investment hotspots that combine lifestyle appeal, Knight Frank’s Edward de Mallet Morgan suggest St Barts and Ibiza. Sydney is also likely to be a “strong performer”, says Knight Frank’s Kate Everett-Allen, and Paris is a “good hedge” and possibly “the alternative investment destination of choice,” comments Alasdair Pritchard, also from Knight Frank.

So, if you’re among London’s prime buyers and considering your options in 2016, where will your spare cash go? On buying taxes, a basement extension or a bolthole overseas? Check in same time, same place next year to see which way the pendulum swung.

 

Taxed Out of Mansions, London Investors Head Down-Market

London’s swankiest neighborhoods of Knightsbridge and Belgravia are becoming no-go areas for even the wealthiest property investors.

They are being driven out by higher sales taxes introduced by Chancellor of the Exchequer George Osborne in December, which rise to as much as 12 percent of the cost of the most expensive homes.

Buying agent Camilla Dell says that her clients are spending an average of 2 million pounds ($3.1 million) less on each transaction this year and they’re more interested in cheaper areas such as Hackney and Shoreditch. That’s because an investor buying a 5 million-pound home pays almost 364,000 pounds more in tax than if they spent the same amount of money on 10 apartments costing 500,000 pounds each.

Osborne has “really depressed” the luxury market, said Dell, managing partner at broker Black Brick Property Solutions. Investors “are still spending the same amount, but they’ll split it up between several properties in the sub-1 million-pound market,” she said.

Through July 23, Dell’s Black Brick broker advised clients on 25 home purchases with an average value of 1.5 million pounds compared with 12 deals averaging of 3.54 million pounds in the same period last year. Sales of London homes for 2 million pounds or more fell by a third in the second quarter from a year earlier, according to property data provider Lonres.

With investors now buying more homes in less expensive districts, prices below Osborne’s threshold are climbing and owner-occupiers, who should have benefited from his tax cuts, are being penalized, Dell said. The tax increases kick in at 937,000 pounds.

“The very buyers Osborne was setting out to help, he’s put at a disadvantage,” she said. “At the same time, sales at the higher end have frozen. It was a very, very bad move.”

The number of investors registering an interest to buy a home in prime central London with Hamptons International dropped 10 percent in the first half compared with the same period last year, said Johnny Morris, head of research at the broker.

Investors who buy multiple apartments for about 500,000 pounds in London typically receive a rental yield of 4 percent to 5 percent, compared with about 2 percent for a luxury home in London’s best districts, Morris said.

In Kensington & Chelsea, the U.K.’s most expensive property borough, 137 homes were sold in April, the lowest monthly total since March 2009, according to the Land Registry.

Values in some of London’s best districts have been falling since the stamp-duty changes, according to broker Knight Frank LLP. Prices in the seven months through July dropped 2.3 percent in Chelsea, 2.1 percent in Knightsbridge and 0.6 percent in Notting Hill, according to data compiled by the broker.

The decline in values in prime central London “is a temporary correction, but I think PCL will eventually continue to grow,” said Giles Hannah, senior vice president at Christies International Real Estate. “That’s because there has been historical shocks before and the market has recovered.”

About 5,000 U.K. homebuyers paid the higher stamp duty levies in the first half, two-thirds of them in London, according to Nationwide Building Society. If the levies had been raised a year earlier, 6,900 purchasers would have been affected, Nationwide estimates.

The average value of a London home sold by broker Savills Plc fell by 200,000 pounds to 3 million pounds in the first half of the year, compared with the same period in 2014, while transactions fell 15 percent in the period, the broker said on Thursday.

“The buyers’ market has returned,” William Carrington, chairman of data researcher Lonres, wrote in a report on London’s best districts on Monday. “I do not see an improvement in market conditions before September.”

Highflying Prime Central London Comes Down to Earth

Sellers of some of London’s top luxury properties are suddenly doing the unthinkable: They’re cutting their prices.

A six-bedroom Georgian townhouse on coveted Kensington Square? Recently reduced to £7 million—about $10.9 million—from an original asking price of £8.5 million. A historic townhouse in the heart of Mayfair? Listed for £16.5 million in February, it can now be had for £14.95 million.

Not so long ago, central London’s property market was the envy of the world, with prices in golden neighborhoods like Kensington and Belgravia reaching new heights every year. Now, this highflying market is coming down to earth.

In the year ending in June 2015, prices in “prime central London” or “PCL”—the upper end of the market in coveted neighborhoods such as Chelsea, Knightbridge and Mayfair—fell 4.3%, according to real-estate firm Savills.

That slide followed years of precipitous growth. Prime central London prices climbed 25% in the year ending June 2010 alone, according to Savills, as the market rebounded from the global housing slump. By June 2014, the median price for prime central London was £3.657 million, according to Savills. Then, for the first time in years, the numbers started slipping. Today, the median price for the prime central market is £3.5 million.

According to William Hughes-Ward, a director at central London real-estate firm Marsh & Parsons, the trouble set in last year, when a shortage of stock on the market pushed prices up too quickly.

As the market continued to stall this year—at the same time that the May national election was approaching—real-estate agents widely said that buyers were spooked by the prospect of a Mansion Tax on homes valued at £2 million or more, proposed by the Labour Party. But even though David Cameron’s Conservative Party won a convincing majority, prices have failed to rebound as many agents predicted.

Buyers do have to contend with a new stamp-duty system, a government tax levied on house sales. Until December of last year, the top tax rate was a flat 7%, levied on all homes worth £2 million or more. The new, incremental system means buyers must pay 12% on the portion of a property’s price above £1.5 million (with a sliding scale of fees levied on the first £1.5 million). It is calculated that the change has raised the tax bill on all homes worth £937,000 or more.

Meanwhile the Bank of England has been threatening interest rate rises for the last two years.

International currency fluctuations have also played a part. The strength of the British pound against the euro has made London purchases more expensive for European buyers, while the devaluing of the ruble has deterred buyers from Eastern Europe.

“We have seen some of the big players such as Russians fall out of the market, mainly due to political sanctions in Russia and difficulty in getting their money out,” said Camilla Dell, managing partner at Black Brick buying agency. 

The biggest problem, according to many analysts, is that prices have simply climbed too high.

“The affordability of London property, even for wealthy foreigners is now too compromised,” said buying agent Alex Newall, managing director of Hanover Private Office, a prime real-estate firm. “Some properties are 20% to 30% overpriced. Sellers need to get realistic if they want to transact in 2015.”

Overseas buyers are still active in London, agents say—just not in prime central London. Many investment buyers are now buying several small properties, rather than one trophy house, to limit Stamp Duty exposure, says Nicholas Finn, executive director of Garrington Property Finders.

The result is that markets outside of the typical “prime” areas are seeing more activity, as buyers seek out more affordable properties. Cheaper boroughs like Newham in East London saw a 17.5% hike in the 12 months ending in May, according to the Land Registry, the government’s official home price monitor. Annual prices for London overall rose 9.1%, to a median price of £475,961.

Despite PCL’s recent fall from grace, agents say there are reasons for optimism. Richard Barber, a director at W.A. Ellis estate agents, points to a strong market for central London homes priced under £2 million. He adds that continued turmoil in the Middle East may encourage more buyers from the region into the safe haven that is London.

Lucian Cook, head of residential research at Savills, forecasts that PCL prices will increase by 22.7% over the coming five years—not the heady growth of the market’s frothiest period, but still a respectable climb.

Mr. Hughes-Ward of Marsh & Parsons points out that London’s high prices are, in many ways, only relative. “For the domestic market prices are way too high,” he said. “However PCL is not a domestic market, it’s a global market. PCL should be compared to Manhattan, Paris, Singapore, Hong Kong or even Mumbai where our prices are actually looking like good value.”

Beware Greeks bearing money to buy in London?

Within 12 hours of Greece defaulting on repayment of part of a loan to the International Monetary Fund, a prime central London buying agency issued a press release claiming it was seeing a rise in Greek clients.

“As we have seen time and again, economic and political instability brings buyers to London’s prime property market. In recent weeks, we have been advising a number of Greek clients on potential investments in the UK, as the risk of Greece crashing out of the Eurozone looms over the continent and, especially, over Greek savers, who could see their wealth slashed by the effect of any devaluation on domestically held assets” says Camilla Dell of buying agency Black Brick.

She says Greece’s super-rich have long been a feature of the top end of London’s property market but the country’s current crisis has seen clients further down the social scale.

“Middle-class Greeks are looking to acquire London property as a hedge against the effects that a return to the drachma would have on pensions and similar investments held in Greece. They are typically looking for investment properties up to the £1m mark that can provide stable income and hold their value” says Dell.

She also says that on the other hand demand from Singapore has fallen in the last six months because the authorities in the Far East were imposing restrictions on mortgage borrowing to prevent a domestic property bubble, with knock-on effects on Singaporeans’ ability to fund international real estate purchases.

“The (likely temporary) departure of Singaporean buyers is being offset by growing interest from elsewhere. As well as increased inquiry from Greece, we continue to see growth in demand from China and, to a lesser extent, from Thailand” claims Dell.