December ended with the traditional flurry of exchanged contracts completing a surprisingly successful year, particularly when set against the global economic crisis and the tumultuous events of 2011.
As we head into 2012 and the forthcoming Olympic games, it is clear that London will continue to be at the epicentre of the financial world and its cultural and educational attractions will be foremost in the global consciousness.
It is now widely acknowledged that the prime Central London market is dominated by investment from abroad and, indeed over the Christmas period, our website was unusally busy channelling enquiries (dutifully replied to, I may add!) from India, China etc. The question remains however: what will all these interested Asians, Europeans etc buy, particularly when contrasted against the newly diminished stock levels enjoyed and displayed on most agents' websites?
One answer may lie in the more arcane area of leashold reform. Our Valuation department is continuing to receive large numbers of lease extension and enfranchisement claims and this may be an interesting barometer for 2012. One may believe that a claim is best made in a weak market (such as early 2009) when the comparable evidence available is at lower capital values; this, in turn, should produce a lower enfranchisement/extension premium. Counter-intuitively however in strong markets lessees tend to make claims as they believe that the capital realisation from the eventual sale will be greater and any borrowing costs will also be offset. A quick sale is also more likely to be realised and exposure to interest reduced.
We believe that some of these current cases will become sales instructions in 2012 and whilst say, 5 years ago, it was relatively easy to sell a short or mid-term lease with an assignable lease extension/enfranchisement notice, it is now becoming harder as the foreign buyers who dominate the market are wary of the uncertainty of the process and would prefer to pay a premium for a property held on a long lease or freehold.
Let us hope that this year the Central London market consolidates its position at the forefront of global investment and that the Chancellor's proposed closing of SDLT loop-holes does not deter investors. At W. A. Ellis we doubt that this will be the case as very few of our purchasers choose to purchase the shares in an off-shore company rather than the property itself, as they fear the ongoing responsibilities of "shelf" companies.
We wish all our clients, applicants and readers a happy and prosperous 2012.
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