The news may be full of the EU referendum debate, and uncertainty might be the flavour of the month, but that doesn’t mean that everything has ground to a halt ahead of the 23 June poll. We are continuing to close on properties for buyers, and this week alone, two of our managed sales clients are celebrating exchanging on disposals of their prime London properties.
As we argued in last month’s newsletter, there are deals to be done in the current market for buyers taking a long-term view, and for sellers prepared to stay the course. In fact, in the last few weeks we exchanged contracts on a £55 million house as well as properties at the lower end of the scale (see below, for our acquisitions of the month). We have also taken a record number of new enquiries for June, ranging from investors at the £2 million level all the way up to an owner occupier enquiry at £25 million. With transactions costs at all-time highs, it appears that buyers need for advice is now greater than ever before.
At Black Brick, we typically act for buyers rather than sellers, but we do offer a Managed Sales service at clients’ request. We recently acted for a US client selling a two-bed penthouse apartment with a terrace in Clerkenwell, achieving a price of £1.3 million, just shy of the asking price of £1.35 million. Our other sale, of a three-bed, two-bath garden flat in Chelsea, went for £2.7 million, again just shy of the asking price of £2.75 million after an aggressive bidding war between two buyers. Interestingly, the buyers for both our properties were represented by buying agents.
The reason we were able to agree terms on these two properties in such a difficult market speaks to our approach, and the value we add over traditional estate agents.
“We’re seeing clients who are frustrated by trying to sell through the traditional estate agency route,” says Camilla Dell, Black Brick Managing Partner. “In this market, you need to do more than post a property on a few websites.
“With fewer buyers, you need to work harder, be proactive, and leverage your network – and that’s why our clients come to us,” she adds.
One area where uncertainty is having an effect is in a greater interest in renting in Prime Central London. In more buoyant markets, clients typically prefer to jump straight in with a purchase, partly out of concerns that they stand to lose out if they don’t move fast.
Given today’s market conditions, we’re seeing a growing number of clients looking to rent before they commit to a purchase. The good news for prospective tenants of larger Prime Central London properties is that rents have not been rising to the degree seen in other parts of London’s rental market. According to figures from Savills, rents for five-bed and larger properties actually fell, by 0.7%, last year, while rents on four-bed properties rose just 0.1%.
But competition for the right properties remains fierce. We recently agreed terms for a family house in Kensington Green, for a Middle Eastern family relocating to the UK. We agreed a rent of £10,800 per month for a four-bed house in St John Villas, but we had to see off a rival bidder. Despite this competition, we were able to secure a £400/month discount on the asking price much to the delight of our client.
Even though renting is clearly less of an investment than a purchase, it still pays to take good advice. Prime Central London tenants can be looking at annual commitments of six figures, and it’s worth remembering that lettings agents represent the interests of the Landlord, not the tenant. Without proper advice, tenants run the risk of overpaying on a rental property, just like a sale, and signing a tenancy agreement that doesn’t reflect their needs. We run comparable analysis and advise our rental clients in much the same way as we do on a sale to ensure our clients understand what they are signing and get the best possible deal.
The music business; retailing; newspapers; the Internet is transforming industry after industry, and estate agency is next. News that Savills has led a £16 million investment in digital property start-up Yopa is merely the latest sign of how Internet-based estate agents are threatening to disrupt the business of buying and selling property.
The opportunity is obvious: by dispensing with bricks-and-mortar shop fronts and, in many cases, the costs associated with employing living agents, online estate agencies can offer sellers a service at a fraction of the cost of incumbents. By some estimates, they are set to capture 50% of the market by 2020.
But you get what you pay for. We predict that, with more places for buyers to search online and less assistance from real estate agents, the services of buying agents will become ever more in demand. If traditional High Street estate agents are replaced with online portals, it will become increasingly difficult for buyers to navigate the market.
At the higher end of the market, in particular, agents add considerable value in terms of market knowledge and bespoke service, especially for time-poor high net worth individuals. It remains to be seen the extent to which online agencies can penetrate the prime property market but, without doubt, the traditional estate agency model is likely to be severely disrupted.
It’s not unknown for sales to fall apart at the last minute – as was the case with our American clients, for whom we had sourced a long-term investment property that was going to be occupied by their daughter while she is working in London.
Just before completion, the buyer pulled out. Within a week, we had found an alternative. Fortunately, our clients preferred the second property – a top floor, two-bedroom apartment in a modern development on a quiet turning close to Highbury and Islington tube station. It boasts lots of light, space and rooftop views, and was secured for £1.25 million, or £989 per square foot.
Shattering the myth that buying agents are only for the super rich, towards the lower end of the scale, we were recently instructed by a first time buyer, with little knowledge of London, to find a two-bed property, below £400,000, within easy commuting distance of central London. As she was moving into the capital for the first time, she was also looking for a neighbourhood with a ‘village-y’ feel.
Meeting that budget and those requirements was a challenge, but we worked with the client to narrow down appropriate locales – settling on Ladywell, an attractive part of South-east London. We sourced a recently refurbished two-bedroom flat, with a shared garden and communal parking, for just £375,000. Not only is the property within 10 minutes of Lewisham Station, and a 30 minute commute for our client, but if the proposed extension of the Bakerloo Line goes to nearby Ladywell station, as proposed, the property promises attractive capital appreciation.
The team at Black Brick would like to send our best wishes to all of our friends, clients and associates celebrating the holy month of Ramadan.