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‘Very British and very discreet’: the revival of London’s St James’s

In its heyday, dukes, dandies, artists and politicians all lived and socialised in St James’s, London. The district, convenient for both St James’s Palace and the Houses of Parliament, was the height of fashion. Gladstone, Sir Isaac Newton and William Thackeray all lived here.

The Earl of Shelburne, later Marquess of Lansdowne and Prime Minister, liked St James’s so much he even founded his own club, Boodle’s, in 1762.

There are still nine private members’ clubs and hotels in and around St James’s Street. The area, which is only now beginning to return to its residential roots, was the place for the wealthy gentleman.

“It’s old English posh,” says Peter Byfield, a restaurateur and entrepreneur who moved to St James’s from Mayfair 18 years ago and has lived there ever since. “St James’s is an incredibly old-fashioned and dignified place to be.”

After the Second World War, the area gradually became more commercial and, with fewer people living there, St James’s lost some of its charm. Now, however, a change in planning rules, allowing office-to-residential conversion, is creating more homes and giving the district “a new lease of life”, says Simon Burgoyne of Knight Frank. “The quality of the apartments is attracting both the British and the international market.”

One such development is Dukelease’s Beau House in Jermyn Street, named after the Regency dandy Beau Brummell. The socialite’s fastidious dress sense and patronage of the local tailors helped make Jermyn Street famous – and the new homes reflect this. The eight apartments are as bespoke as a handmade suit and with the same attention to traditional detail.

A two-bedroom apartment in St James’s Chambers is on the market with Knight Frank for £3.25 million

The many unique features include leather-panelled walls, walnut cabinetry and herringbone-pattern oak floors. There are Calacatta marble floors, Boffi kitchens and Romana Salperton wall lights.

Prices start from £1.85 million for a one-bedroom apartment over 657 sq ft, and rise to a sizeable £15 million for the three-bedroom furnished penthouse, which comes with a TV-equipped roof terrace and views of Christopher Wren’s St James’s church. The homes are being marketed by Knight Frank.

Jermyn Street’s distinctive shops, some of which are still owned by the descendants of the original families that established them, have been frequented by Diana, Princess of Wales, Ted Heath and Joanna Lumley.

Its ‘olde worlde charme’ and postage-stamp size mean that buying a home in St James’s is not easy

“Jermyn Street is a curiosity area,” says Richard Harvie, owner of Harvie and Hudson shirtmakers. “People love going into old family businesses that have not changed a lot, with slightly creaky wood floors, and which do not exist anywhere else in the world.”

However, St James’s “olde worlde charme” and postage-stamp size (it is wedged between Piccadilly and the Mall) means that buying a home here is not easy, as “there are very few flats”, says Caspar Harvard Walls, partner with the buying agency Black Brick.

Westminster council estimates that there are just 7,239 households in St James’s. Unlike Mayfair or Knightsbridge, there are few large blocks of serviced apartments and even fewer with fancy hotel facilities, gyms and spas.

“St James’s is not showy; it’s very British and very discreet,” says Harvard Walls. “It appeals to a certain type of buyer.”

A bespoke decorated flat in Dukelease’s Beau House in Jermyn Street, on the market with Knight Frank from £1.85 million

The majority of developments are boutique, with clusters of (generally small) one- and two-bedroom flats for between £1 million and £2.5 million – roughly £2,000 to £2,500 per sq ft. Newbuild apartments, often behind elegant Georgian and Victorian listed facades, are pricier and reach £3,000 per sq ft and more. Knight Frank is selling The Pall Mall Collection and three of the four apartments remain; a three-bedroom flat is £4.95 million and a four-bedroom penthouse is on the market for £8.95 million.

House prices there are not all in the millions, as Horne and Harvey is selling a one-bedroom flat on the fourth floor of a portered building in Duke of York Street for £950,000.

“The streets are quite densely packed and often people want to be higher up, on the second floor or above, as it can be quite dark lower down,” says Harvard Walls.

The Crown Estate, which owns around 50 per cent of the buildings in the area, is halfway through a £500 million refurbishment programme of its St James’s portfolio, which, although it consists mainly of retail such as St James’s Market, includes some new homes as well.

There’s a lot of demand, too: recent redevelopments such as Cleveland Court, near St James’s Palace, have all swiftly sold.

Forthcoming apartments, which will only be available to rent, include huge, lateral three-bedroom flats and a five-bedroom penthouse in 30 St James’s. All will be available at the end of this year.

Surrounded by art galleries and smart restaurants, with the West End and the park within strolling distance, St James’s appeals to the buyer who “has a house in the country and wants a pied-à-terre in London”, says Harvard Walls, “so they can walk to work and to the opera”.

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.

Pretend you’re a millionaire: Britain’s luxury homes from £1m to £100m

Listen carefully this month and you’ll hear the distinctive rattle of keys or the clipped sound of well-buffed shoes and stylish stilettos on the pavement as London’s high-end estate agents hit the streets after the summer lull.

Many wealthy vendors take their homes off the market in June, July and August before recommencing the hard sell in the autumn. The pause in proceedings means they can relaunch in a push to snare a buyer at the highest possible price before demand falls away again in mid-November.

To add to the flurry, September is the month that many owners test the market for their luxury homes for the first time.

But is there such a thing as value for money at this level, and who will snap up these multimillion-pound homes? Here’s our guide to buying in the luxury London market and what you can get both in and outside the capital, should your Lotto numbers come up.

The £1 million mark

What does a million get you in London these days?

This tends to be the price territory for affluent young families with two properties to sell – and even then it doesn’t go that far. In fact, the once-princely sum is now the average house price in 4,735 streets in the capital, according to the website Zoopla.

Stick to central London and £1 million will buy you an off-plan one-bedroom flat in the Nova complex in Victoria – near Buckingham Palace, but at 652 sq ft hardly palatial itself – or a one-bedroom flat in Sloane Gardens, Chelsea.

“Alternatively, it’ll fund you a short lease flat – something with just a few years left but that will cost another couple of million to extend,” says Jake Russell, co-director of Russell Simpson estate agents. Or it might see the beginnings of a two-bedroom flat in the less swish bits of Chelsea or South Kensington.

Head into the nappy valleys of zones two to four – the likes of Blackheath or Muswell Hill – and £1 million buys a three/four-bedroom Victorian terrace house with a small garden. In Wandsworth these days it gets you a two-bedroom riverside flat, which means couples with a toddler and a bump are heading into the hinterlands of Tooting, Teddington and Forest Hill.

And a surprising number of young buyers have a million to spend, with many financed by the “Bank of Mum and Dad”. “Some are couples selling two single properties to buy one bigger home and others are young tech whizzes who have made a fortune designing apps,” says Jo-Anne Neighbour from Savills Islington.

Meanwhile, go north and your pot of gold goes much further. In Dore, a village on the edge of the Peak District, south-west of Sheffield, Fine & Country are offering Monnybrook House, with six bedrooms and a swimming pool, for £1.15 million. Travel into Scotland and you can bag yourself an historic estate: Lowood House, just three miles to the east of Edinburgh, is on the market with Strutt & Parker for £1.06 million. The property comes with extensive grounds and several outbuildings.

Up to £3 million

This is the price bracket for family homes near Battersea Park and other desirably leafy London enclaves.

“Buyers at this level are looking for a ‘forever home’ with an easy commute to the City, space for a growing family and good schools,”

says Robin Chatwin, head of Savills in South West London

Think bi-folding doors and fancy basements. Marsh & Parsons have a five-bedder that fits the bill in Barnes Village for £2 million.

If you can stretch your budget to £3 million, you’ll move into large five/six-bedroom houses in the best bits of Wimbledon or Richmond or a four-bedroom period flat in South Kensington’s sought-after Cranley Gardens, through Marsh & Parsons.

Venture out into rural England and up to £3 million will bag a country pile, such as Peplow Hall, a Grade II listed 18th-century home in Shropshire: 11,600 sq ft, plus a coach house apartment and 65 acres of gardens with a swimming pool, tennis court and lake. Yours for £2.45 million through Savills.

Up to £5 million

“If you are shopping around £5m rich under-40s in the finance, property, oil and gas and tech sector”, says Charlie Bubear from Savills.

In Chelsea, there’s another group shopping for £5 million homes – newly-weds given extravagant houses as a wedding present from their parents.

“They want ‘turnkey’ properties with gadgets such as Lutron lighting, integrated sound systems and wine fridges,” says Bubear.

Ideal for them is the London Factory, a hi‑tech four-bedroom, 5,000 sq ft house in a converted factory in Bermondsey, on sale for £3.5 million through Savills and Sotheby’s.

Head to Notting Hill, Marylebone or Little Venice and you’ll be competing with American and European house-hunters wanting “3,500 sq ft and upwards”, says Jo Eccles, the director of the search company Sourcing Property. Qatari buyers are also prominent in this market, according to Rokstone Estates. “They want 24-hour porters and properties that are ready to move straight into,” says Rokstone’s director, Becky Fatemi.

For “growing London families looking to get more house and land for their buck”, Octagon has designed Burford Place in Picketts Hill, in Hampshire – an hour from Waterloo. The seven‑bedroom mansion of 7,700 sq ft is set in 5.5 acres and on sale for £4.75 million.

Up to £10 million

Welcome to the world of celebrity. Jamie Oliver has just splashed out on a Grade II listed 17th-century, eight‑bedroom house in Hampstead as a family home (as well as the £7 million one he owns down the road in Primrose Hill). Kate Moss and George Michael are just across the heath in Highgate.

There are 13 streets in London where £10 million is the average house price, a market that was, until recently, dominated by international buyers. But falling oil prices have knocked wealthy African buyers out of the market, according to Camilla Dell from the buying agency Black Brick, and the Chancellor’s overhaul of the stamp duty system has also deterred others.

On your viewing list for around £10 million would be a raft of elegant Knightsbridge town houses and newbuild designer penthouses in areas of London that would never have conceived of such budgets a decade ago.

You could buy the vast duplex three-bedroom penthouse at The Heron in the City, a three-bedroom flat at The Beecham in Covent Garden, or a six-bedroom detached house in St John’s Wood.

Head north and £10 million will buy you 2,200 acres of Northumberland countryside with a 12-bedroom house from GSC Grays or an 11‑bedroom mansion with 12 acres in Alderley Edge, Cheshire, through Jackson-Stops.

Up to £20 million

So, if £10 million buys you a huge house with bells and whistles in a prime location, what does £20 million get you? It’s simple, really: “More space and an even better location,” says Rokstone’s Becky Fatemi.

It’s the difference between Elystan Place – a five-bedroom 3,300 sq ft house “in the heart of Chelsea” and Chesham Place, a five‑bedroom 5,000 sq ft town house “in the heart of Belgravia”.

Westminster has joined the super‑luxury gang with four properties costing more than £20 million hitting the market simultaneously – a first for this central but undervalued area. Two of the properties are neighbours. Numbers 26 and 28 Old Queen Street are adjoining Grade II listed black brick Georgian town houses that have been given dramatic makeovers inside. Each covers more than 7,000 sq ft, on sale for £23 million through Hathaways.

This old establishment street in the heart of British politics attracts British wealth, but the historic area is starting to pique international interest.

Outside London, Kingstone Lisle Park, a 13-bedroom Georgian farmhouse with 257 acres in Oxfordshire, is on sale for £20 million through Knight Frank.

Up to £50 million

By the time you’re in the £50 million league, forget about looking in estate agents’ windows.

Only about 10 per cent of properties at this price level will be openly marketed, says Jonathan Hewlett, head of Savills London. This year, six of the big central London luxury house sales at £40 million or above have been to Qatari buyers – including a nine‑bedroom mansion on Mayfair’s Charles Street, with a private pool and cinema complex.

Currently on sale in Avenue Road, St John’s Wood, is a seven-bedroom, 11,000 sq ft “ambassadorial residence”, with indoor pool, leisure area and cinema, for £40 million (through Beauchamp Estates). But Kensington Palace Gardens is the country’s most expensive street – the average house price is £42.6 million, according to Zoopla.

Up to £100 million

There’s only one property in London that’s being advertised at anywhere near this price – a five-bedroom apartment in One Hyde Park offered for £75 million through Savills.

For that you get 9,000 sq ft of opulence in two wings linked by a 160ft hallway, a 24-hour service provided by the Mandarin Oriental hotel and views over Hyde Park.

Offer the guide price and they’ll even cover your stamp duty – which at nearly £12 million would be enough to buy you a six-bedroom Kensington town house.

“Clients with budgets of £100 million or more won’t touch anything that’s on-market. They don’t just want the ultimate in luxury, they want the ultimate in discretion,” says Nick Dawson of Garrington buying agents.

But don’t get carried away with the idea that it’s “money is no object”, even for those with the deepest pockets. “Most buyers with this kind of wealth are making hard-headed investment decisions about buying now while prices at the loftiest end of the market are slipping,” adds Dawson.

Are Americans coming to rescue London’s ailing property market?

By Isabelle Fraser

Many Americans would have us know that they “saved” us from the Germans in the Second World War. As we approach the 75th anniversary of the Normandy Landings, I’ll leave that heated debate for another day.

But now they might be coming to save us from something else: our sluggish property market.

Buying agent Black Brick reports that there has been a big jump in the number of Americans wanting to buying property in the most expensive areas of central London, accounting for nearly one third of its clients in the year to June.

These American buyers can now get a 40 per cent discount on what they might have paid at the top of the market. Property prices in many areas of prime central London have fallen 15 to 20 per cent, and they have the exchange rate behind them too: in July 2014, the pound was worth $1.71, but in the last two years it has traded between $1.27 and $1.43.

“Our US clients are not put off by Brexit or the threat of a Corbyn government; instead, they view the market as a good buying opportunity,” says Camilla Dell, of Black Brick.

“Our largest transaction for a US client – more than £20 million – was because he had decided to relocate to London and run his technology business from here. After Silicon Valley, London is the next best place for IT entrepreneurs. We have the infrastructure and talent to be able to support companies like this.”

Donald and Melania Trump arriving in the UK last year. He’s visiting the UK again in June CREDIT: AFP

These buyers are largely coming from New York, LA, San Francisco and Chicago, as well as a few from Houston and Dallas, according to Berkshire Hathaway HomeServices Kay & Co. They’re prepared to pay upwards of £10 million on average, looking in Marylebone, Hyde Park and King’s Cross, and for larger family houses in Mayfair, Belgravia, Hampstead, Notting Hill and St John’s Wood.

It fits in with a general picture of returning health for the high-end market, too. Knight Frank said earlier this month that the number of offers made (not just by Americans) for these pricey properties in the first three months of this year was the highest in more than 10 years. The level of new buyers was also at the highest figure since 2014, when prices were at their peak.

Transactions have increased in prime central London among homes priced under £1m, between £1m and £2m, and over £5m, according to LonRes. It’s the market for homes between £2m and £5m that is suffering the most, where the level of sales continue to fall.

So what’s changed? Political uncertainty remains, albeit in the background. Sky-high stamp duty, which decimated the market four years ago, is still a major factor. It’s a more imperceptible shift of momentum: a mixture of sellers’ increasing realism combined with buyers getting bored of waiting to see what happens with Brexit.

But it’s not all sunshine after the storm in the prime central London market: there’s been a 39 per cent fall in the number of new properties listed in the first three months of the year, compared with the same period in 2018.

That’s proving to be one of the biggest problems for the ultra-rich, as there aren’t enough suitably high-end, ultra luxurious properties to buy.

How to avoid getting into negative equity if house prices fall: the latest property advice

House prices are likely to fall, which means buyers with high LTV mortgages could find themselves with assets worth less than they borrowed

By Melissa Lawford

Analysts disagree on how much UK house prices will fall due to the coronavirus outbreak and subsequent market freeze, but the consensus is that they will take a hit.

Many buyers are worried about getting into negative equity as soon as they have purchased their homes. This means that you own a property that is worth less than what you borrowed to pay for it.

Buyers who have purchased with high loan-to-value mortgages are most at risk. If you have purchased just 5 per cent of your property with cash, for example, you will quickly be in negative equity if house prices fall by 13 per cent, as forecast by the Centre for Economics and Business Research (CEBR).

But that would not mean that you have to immediately sell your house at a loss. Here, we look at your options, and what buyers can do to protect themselves.

What happens if you get into negative equity?

“The biggest misconception about negative equity is that people think they’re suddenly going to be repossessed,” says Nick Morrey, of John Charcol, an independent mortgage broker. “That couldn’t be further from the truth.”

If you are able to wait out the market until prices climb, you should be fine. “Over every five year period, prices have ended up higher, even if there is a crash in the middle,” says Morrey.

Most analysts are predicting a “V-shape” economic recovery after lockdown is lifted, and both Capital Economics and Knight Frank expect house prices to return to growth in 2021. “If you do get into negative equity, hold on,” says Tim Hyatt, of Knight Frank.

Most lenders have removed high loan-to-value mortgages for new purchases, says Morrey, but it is still possible to find options for transfers, as these don’t require the lender to send a valuer to the property. If your mortgage deal is coming to an end, talk to your lender about what options you have for switching.

If you’re not able to transfer, you will be moved to a standard variable rate mortgage when your current deal ends. While the costs could be higher than what you were paying before, the difference will be mitigated by the fact that the Bank of England base rate is currently at a historic low of 0.1 per cent.

What if you have to move house?

If you’re in negative equity and you can’t sit tight, your situation is more problematic. You will need permission from your lender to sell if the sale price is likely to be less than the remaining value of the mortgage. And you will be personally responsible for making up the difference in value.

A better option is to contact your lender and ask for consent to let out the property, says Morrey. In other words, you can become an accidental landlord.

Be wary that rental values are likely to take a hit, particularly with the expected influx of stock from the short-term lettings market with the collapse of the travel industry. But hopefully, the rental income can cover your mortgage payments and free up your disposable income so that you can rent elsewhere while you wait for property prices to recover.

Is now a good time to negotiate a deal?

The Government has issued strong guidance against all but essential house moves during lockdown. While sales can still technically proceed, the market is a minefield. Many chains are falling through and some buyers can’t meet their completion dates.

When lockdown lifts, however, some buyers might consider the market an opportunity. If house prices are falling, “you’re likely to be able to make a cheeky offer,” says Morrey.

There just might not be much stock to take a punt at. After a crisis, “we will always see a bit of distressed selling,” says Camilla Dell, founder of the London buying agency Black Brick. “There will be some undoubtedly, but I think it will be few and far between.” The Government’s measures to protect earnings, mortgage holidays, and low interest rates will mean fewer sellers will be forced to take big price cuts.

If you are trying to negotiate, “the key to success is understanding your seller”, says Dell. If you know why, or how urgently they need to sell, you have more bargaining power.

You will also have an advantage if you “can demonstrate that you can move quicker, and anyone sitting on cash is in a great position”.

For those that aren’t may find that they simply can’t buy. Lenders have withdrawn high LTV mortgages from the market en masse. The available mortgage offering has shrunk by nearly a third and you will likely need a deposit of at least 20 per cent to secure lending.

Which parts of the country will be safest to buy in?

In the immediate term, the impact of coronavirus and the lockdown will be “very much uniform across the country,” says Lawrence Bowles of Savills Research.

When the restrictions lift, however, “we would expect equity driven markets to recover first,” he says. In prime central London, for example, people are more likely to buy with cash rather than with a mortgage, so purchasers will be able to move more quickly.

Recovery will also be dependent on the local employment markets. According to analysis by the CEBR, 48 per cent of the UK population works across the sectors most affected by the coronavirus lockdown: manufacturing, construction, retail, hospitality and other service sectors.

But their concentrations are highest in particular regions. In Yorkshire & the Humber and Northern Ireland, 60 and 59 per cent of workers are in these industries respectively. Disruption to the job markets here is likely to have a bigger impact on the local housing markets, according to CEBR.