27 June 2012, Evening Standard
The best things come in small packages
By Faith Glasgow
As irresistable as the glossy brochures of large scale housing schemes may be, many home hunters might find a better deal if they focus on smaller, less high-profile developments. One attraction of these more humble projects is their “specialness” offering the chance to buy a “one off” flat, rather than clone of the other 199 apart-ments in the block. Says Peter Rollings, chief executive of estate agent Marsh & Parsons: “Often, smaller developments are effectively conversions, and this mix of traditional and contemporary archi-tecture piques buyers’ interest.” Rollings points to the ongoing nine-unit conversion of a former mill house in Millers Way, Brook Green, west London, where three properties are already under offer. “We expect all will go before a show home is finished, let alone the whole development,” he says. Of course, there are some respects in which grand scale wins out on the life-style front. A strength of many larger developments is that they are able to offer hotel type amenities, such as a residents’ gym, pool or concierge service, which wouldn’t be viable in a smaller scale scheme. “On the flip side, it means that service charges for smaller developments are usually much lower,” Rollings adds.
When it comes to rental investment potential, small scale schemes have some important advantages over major developments. First, they tend to be bought predominantly by owner occupiers rather than landlords. “I’d estimate that the proportion of homeowners in smaller, lower density developments in prime locations is around 70 per cent, compared with high density new build developments where more than 70 per cent of buyers will be investors,” says Camilla Dell, managing partner of buying agency Black Brick Property Solutions. This is because homeowners expect to “fall in love” with a property, including its idiosyncrasies and eccentricities in addition to its well-thought-out design, views and sense of community and they will pick and choose to find the right place. In contrast, says Dell, large-scale developments are marketed as a matter of course to speculative investment buyers in Asia, who buy off-plan and want only to trade or rent out their units, not to live in them. The flats in these schemes tend to be smaller, cheaper, relatively standardised units to appeal to that market.
Served rare there is greater “rarity value” for each unit in a small development, and a much lower risk of several landlords putting their apartments on to the rental market at any one time. “Units in big schemes can usually only compete on price,” says Naomi Heaton, managing director of central London property investment firm LCP. “We occasionally take on rental properties in areas such as Canary Wharf for clients, but we have to discount the rental by about 25-30 per cent [over wider market values].” Moreover, observes Martin Bikhit, managing director of estate agent Kay & Co, timing can be a problem. When a lot of units in a scheme are sold to buy-to-let investors, a rush of similar units typically comes to the rental market at the same time on completion of the development. “This is not an issue in a buoyant market, but in a quieter market a glut of pretty much identical apartments can result in downward pressure on rental prices,” he says.
Heaton also warns that where absentee landlords and itinerant tenants predominate, the building and surroundings may not be so well looked after. “Homeowners tend to set up active residents’ committees to make sure everything is as they want it to be,” she says. Smaller developments, especially those in good locations, also tend to hold their capital value better because of the scarcity factor. Says Marsh & Parsons’ Rollings: “When it comes to reselling, because there’s a small number of properties in the development, few are likely to be marketed simultaneously. That lack of supply strengthens the vendor’s position.” The sheer volume of similar units in a large scale development can dampen resale prices particularly given that such schemes are often part of the wider long term regeneration of a whole district of the capital. Kay & Co’s Bikhit fears that may be a problem when the Olympic Village is turned into a 2,800-unit mixed community of affordable and privately owned housing after the Games.