The Month in Numbers and the market reports for lettings, flats and houses in Prime Central London. Asking prices in K&C have fallen 4% over the year but we know that sale prices have risen. But what is truly impressive is that the number of homes selling in December for more than £2m has risen by 100% over the last year and in London, the number of homes selling over £1m (those that at least two prospective Chancellors hope to take a 'Mansion tax' from) rose by 200%!
The Month in Numbers always provides something interesting and this month is no exception. As they used to say, 'don't leave home without it'.
Market comment - house sales
As of March 21st Spring is officially here and traditionally, this is considered the prime selling period within the housing market. Agents within Central London have been busily ‘priming the pump’ throughout January and February, enticing potential vendors to come to the market, with much talk of a “strong recovery” and values in excess of their previous Autumn 2007 peak.
Indeed, whilst sales volumes have been low and stock short, there have been some exceptional sales over the last three months, which have further fuelled people’s perception of the market and vendors’ expectations. It could certainly be argued that the recovery in the Central London market, fuelled by an exceptionally weak currency and record low interest rates, has been too rapid and as a consequence, we have now reached a ‘tipping point’. Is this current lull merely a breather or the beginning of something more ominous? Would a new government provide the fillip we all need or will the necessary cuts in services and tax hikes, necessary to reduce our enormous budget deficit, cool the market to its previous Spring ’09 levels?
My best guess is that we will plateau and whilst the flat market between, say £1,000,000 - £3,000,000, will continue to prosper, fuelled by foreign purchasers seeking pied-à-terres (and taking advantage of their currency advantage) the traditional London house market may languish.
Agents, having promised their clients the earth, may have to deliver the bitter pill of a severe price reduction in order to generate sales or, in a repeat of last year, over-optimistic vendors may have to become this year’s reluctant landlords or, more commonly, quietly withdraw until next spring.
The recent increase in stamp duty for property in excess of £1,000,000 from 4%-5% (implementation April 2011) may also have a psychologically dampening effect on our market. Mr Darling may find that, whilst popular with the general public, his policy of targeting the ‘rich’ may well backfire, for, as sales reduce, so will his revenue.
Market comment - lettings
As I look back over March, the two major topics to report are firstly, the rapid change in the Lettings market in Central London and secondly, the Budget and any implications it will have on our market.
As a Letting agent who has seen all the peaks and troughs over the last 27 years, it is once again a real treat to be working in such an interesting and more importantly, rising market. Stocks in Central London are down by at least 60% and the majority of good quality, newly refurbished property being released on to the market, is letting like a shot, often with bidding wars between prospective tenants. Tenants are now well aware of the shortage of stock and once they have found a suitable property, they are anxious to secure it quickly.
On annual increments where there are no fixed increases, we are managing to bring the rents back up to pre-credit crunch levels and in some instances are seeing increases of between 20% and 30%. We recently had a situation whereby a tenant would not agree the increase within his option to renew and therefore missed the timeframe to exercise it – the first prospective tenant to view offered asking price, giving an increase in excess of 20% and the tenant ended up unsuccessfully trying to gazump him. Landlords are calling the shots again and are becoming much more confident in insisting on their terms, ie guaranteed annual tenancies rather than allowing tenant break clauses or at the very least, allowing business release clauses so that the tenant may only vacate in the event that they are transferred out of London.
Although yields remain low, now could very well be a good time for investor landlords to build or increase their portfolios. There is more stock coming onto the Sales market and therefore more choice and it is essential that investors stick to our buying advice – and be aware that it is not just location, location, location when ‘buying to let’. We are a team of twenty in Lettings and spend a lot of our time advising our clients what or whether to buy - we are always happy to inspect prospective investments and give our opinion. We are crying out for stock as in the Central London market available property drops to dangerously low levels.
The Budget (or perhaps the non-Budget, as I believe the real Budget will follow the Election) - gave no assistance to the growth of the Private Rental Sector (PRS). The PRS is a key element of the Government’s future housing strategy as the provision of new homes has fallen behind demand. Wearing my ARLA hat, I have been urging No. 11 to promulgate a business focused approach to the sector and to review prohibitive barriers to further investment, such as Stamp Duty. Stamp Duty featured in the Budget, giving welcomed assistance to first time buyers and an unwelcomed increase, as from 2011, on Stamp Duty to 5% on properties worth over £1,000,000. However, it did not offer anything to encourage ‘Buy to Let’ investors, who would welcome a reduction in Stamp Duty and the reassessment of the ‘slab’ structure of Stamp Duty to create a fairer system.
In my opinion, landlords should be treated as the businesses they have now become and the Government should support and assist them. The taxation criteria should incentivise the improvement of stock and therefore conditions in which tenants live. Other policy changes could focus on removal of VAT on the purchase of materials/labour and the introduction of capital allowances for landlords improving older housing stock.
Who knows what will happen after May 6th and whether the next Government will give more assistance to the property market in general and also my other bugbear, the much needed regulation of Estate Agents and Lettings Agents? I pray for both!
Market comment - flat sales
It is often hard to pin down the start of the Spring market but as I sit here in a sun drenched office looking at the offer board, it is hard to argue against it starting on 15th March. The sun came out, the temperature crawled out of single figures for what felt like the first time in months and off we went; the phones rang with renewed enthusiasm; an urgency had returned to the voices of both applicants and Search Agents.
January and February is a difficult time to judge a market and although buoyant, the Flat Sales side of the business was quieter. This was all relative to the last three months of 2009 with December, as is often the case, feeling like an end of term as everyone wants all things settled before the festivities begin. I note on the agents' intranet system that in December, in prime parts of SW1, SW3 and SW7, 82 flats exchanged contracts, with eight of those being through W.A.Ellis (not bad considering the number of competitors). January and February were always going to feel slow; productive, but slow. In January, within the same postcodes, 39 flats exchanged.
So here we are in early April. Interest rates have reached their first birthday at an all time low. Celebration for those with tracking mortgages, commiseration for those with savings. A year ago these low interest rates, combined with the tail end of a deathly sales market, led to the reluctant landlord; a vendor who chose to rent and ride out to the downturn. A year on all has changed, and in the past six weeks, three flats (in Onslow Square, Evelyn Gardens and Drayton Gardens) returned to the market after a period of tenancy. All have either gone under offer or have already sold.
Our instruction list is looking a little healthier but all relative to the near blank sheet we had at the start of the year. In the interests of a steady market, a steady flow of instructions to balance demand will keep things ticking along nicely. The Euro demand continues to be strong for good 2+ bedroomed flats up to £3m, give or take and this shows little sign of changing.
I read in a Saturday paper that we were back to a buyer's market; countrywide this might be the case but not in prime addresses in Central London. If a vendor is considering selling, now is the time to call in agents but be aware of appraisals that sound too good to be true. Flats will sell well but asking prices need to make sense and your agent should be able to back up their figures with facts not a finger in the air!
Email this Newsletter article
Print this page