30th November 2021
The year began with Britain entering its longest-ever period of lockdown, and gloomy forecasts about its economic prospects. But even Covid-19, rampant inflation, and a good dose of political turmoil has not stopped people from buying and selling homes.
The latest UK House Price Index, the most authoritative account of average sale prices, reports that values in the capital have increased by almost 3 per cent in the past year – certainly not a stellar performance but encouraging given the wider scenario.
And with this overarching figure lies a far more complex truth.
Price growth has been far stronger for family houses than for flats. Some boroughs – notably those in the outer suburbs – have outperformed as buyers ripple outward in search of space and greenery.
In central London, Hammersmith and Fulham has seen impressive annual growth of 12.9 per cent, while Westminster and Kensington and Chelsea achieved 2.7 per cent and 3.5 per cent respectively. Tower Hamlets, with its mass of modern flats close to Canary Wharf and the City, saw prices tumble seven per cent in the same period, making it London’s worst performer of 2021.
The pandemic has taken a serious toll on London’s most prestigious addresses, but industry big hitters are confident that the worst is over for prime central London (PCL).
Savills forecasts that sale prices will jump by eight per cent next year, and 23.9 per cent over five years, as overseas buyers return to London and city centre living comes back into favour post-pandemic. Its analysts point out that buyers are also aware that today’s prices represent something of a bargain, lagging 20 per cent below the levels seen during the last peak in 2014.
Strutt & Parker also has an optimistic take on PCL’s prospects next year, predicting growth of between five and ten per cent during 2022, and up to 35 per cent over the next five years.
However next year’s forecasts may change. “We are anticipating a strong start to 2022 if travel restrictions do not materially change because of the new Omicron variant. I think most overseas clients can accept a 2-day quarantine with a PCR test but anything more stringent will see the boost to London property delayed. I think it will be a case of “when” not “if “ we see a resurgence in PCL” said Camilla Dell, managing partner at Black Brick.
“It is true that over the past year there has been no traction in PCL, but I think we are going to see increasing demand for really well located property,” said Caspar Harvard–Walls, partner at Black Brick. Managing Partner Camilla Dell, having just returned from a business trip from the Middle East, provides an insight into current appetite for PCL property amongst clients from the region, “I cannot remember a time when demand for PCL seemed so high. Almost everyone I met with has plans to increase their exposure to PCL over the coming months. In particular freehold blocks of apartments are extremely popular with investors in the Middle East”.
Not all PCL is equal, of course, and Harvard-Walls suspects that the hottest spots will be chic London village locations. “Perhaps it is the pandemic, but the demand from our clients is really for somewhere central enough that you can go to restaurants and the theatre, but where you also have a really good high street. They like the idea of knowing their neighbours and the name of the guy at the local café.”
Marylebone is a name that keeps on coming up with Black Brick customers, while the increasingly impressive range of cafes, restaurants, and boutiques on Pavilion Road is starting to give extra allure to the streets just north of Sloane Square too. “People are really investing in the London village idea,” said Harvard-Walls.
A key property motif during the pandemic has been high buyer demand for houses; apartments have been left languishing on the shelf.
In 2020 only 22 per cent of Black Brick’s clients bought London houses. This year this figure has shot up to 57 per cent as buyers hankered for back gardens and space to work from home.
The result is that flats across London are starting to look like really good value, although there is compelling evidence that the tide is starting to turn.
Exclusive research for Black Brick by LonRes found that flats in a string of key London postcodes are substantially lower now than they were in 2014. In Westminster, for example, the news is bad for all those MPs with second homes close to parliament. Prices are down by a resounding 14.3 per cent, to an average of £1,145 per sq ft.
Since the start of 2019, prices are down more than 5 per cent in Canary Wharf to an average of £682 per sq ft, and by more than 4 per cent in Soho and Covent Garden, to £1,093.
However, some locations have started to see a recovery – prices in villagey Fulham are up 11 per cent since 2019 (£933 per sq ft).
The speed of sales is also accelerating. In early 2019 homes were taking an average 240 days on the market before exchange of contract. This year that had dropped to 197 days. Discounting is also on the wane. In the first quarter of 2019 the average agreed discount on asking price was 10.8 per cent. This year the average wiggle room has been 6.9 per cent.
“What I find is that when the property market reacts, what it actually does is over-react,” said Harvard-Walls.
“The pendulum swings really hard in one direction, in this case towards houses. There is an opportunity now to catch the flat market just as it is about to rise.”
The return of overseas buyers plus the return of many workers to their offices will, believes Harvard-Walls, be the kick start the flat market needs although buyers will be extremely picky.
“What has not been selling is second hand buy-to-let investment flats that are 5, 10, 15 years old, without outside space,” he said. “There is no market for them. What there is a market for is really smart flats in A-grade locations.”
Once the presents have been opened, the turkey consumed, and the Queen’s speech watched Britons will turn to another seasonal tradition: house shopping.
According to property portal Rightmove, the number of people browsing spikes on Boxing Day, with the number of hits last year up 54 per cent on 2019 levels.
All these sofa surfers could be missing a trick, however. “December is actually a brilliant time to buy a house,” said Harvard-Walls. “Inevitably as we move closer to Christmas the market slows down.”
“People are busy, it gets dark so early that you can’t do a viewing after 4pm. But a lot of people are really keen to start the new year in a new home, so offering to let them stay at home for Christmas but then move in January is a great bargaining tool. I once made an offer on a house on December 23 – and yes, it was accepted.” In fact, both Black Brick partners made offers on and bought their family homes in the month of December!
There is also evidence that the long-running shortage of stock on the market is starting to ease off, giving December house hunters plenty to think about.
Rightmove reports that in October the number of new instructions had returned to pretty much pre-pandemic levels, just two per cent lower than the average for 2015 to 2019.
Currently on the market is a sumptuous John Nash-designed Regency house on Cornwall Terrace, Regent’s Park.
There are two things we can say with certainty about its future owner. They will have deep pockets – the seven bedroom townhouse, measuring more than 9,000 sq ft – is on the market for £20m. And they will be brave, because the property is being sold, by Knight Frank, in “shell condition” and in need of a full fit out.
Taking on a project house can be an exciting, fulfilling, and cost effective experience, but only if you get your maths right at the outset. Knight Frank reports that some buyers are being deterred from taking on properties that need work because of construction supply chain disruptions and spiralling costs, and indeed the price of the Cornwall Terrace house has recently been cut from £22.5m.
“Buyers have got to be extremely aware,” agreed Harvard-Walls. “Agents may have valued a property before these issues emerged. Things have changed a lot in the last six to 12 months. Refurbishment costs may have gone up, in particular labour costs, and the asking price needs to reflect that. It is a minefield.”
The solution Black Brick employs is to get an up to date independent contractors’ estimate for the cost of work, so buyers know exactly what they are up against before negotiations commence.
Our clients were both lawyers and wanted to be within a 20 minute commute of Mayfair. They also wanted a spacious property – at least 1,600 sq ft – with a minimum of three bedrooms plus some outside space. They were too busy to embark on a house hunt and hired Black Brick to assist.
After searching across Belgravia, Marylebone and South Kensington, our clients fell for a house on a quiet mews with the required three bedrooms and measuring 2,177 sq ft. The house needed a cosmetic upgrade and Black Brick put the clients in touch with a contractor who was able to talk them through the scale, and likely cost, of the works.
This allowed us to factor in the cost of renovation during negotiations – and secure a discount of almost five per cent on the asking price.
Our clients were delighted – as well as saving time on looking for the right house they also ended up saving money.
Our North American client had just been appointed CEO of a London-based company and needed to find a rental to live in while he settles in and starts house-hunting.
He was keen to live in Marylebone, and wanted a property with at least two bedrooms, and some outside space.
Homes with outside space are quite a rarity in Marylebone but Black Brick successfully sourced a rarely-available and newly refurbished mews house, in a quiet street close to Marylebone High Street.
The property has three bedrooms, a roof terrace and private parking. As an added bonus, the principal rooms were air conditioned.
Renting a mews house in Marylebone is a competitive business but, through our extensive network of contacts, we managed to view the house before any other potential tenants had seen it. We rapidly made an offer and secured the property, fending off the competition in the process.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.