On The Market - Notting Hill, Holland Park & North Kensington, Spring 2013
Tue 23 Apr 2013
Liza-Jane Kelly looks at current hot spots for buyers and why the recent budget brought positive news for the property market
Property price growth in The Royal Borough has steadied and is now moving towards a more sustainable rate of increase. Buyer demand remains strong, however a mild improvement in the supply of available property is easing this pressure, with the buyer-to-property ratio now standing at 11.6 buyers for every property, compared to 15.3 during the same period last year.
Notting Hill has experienced a pronounced shift in buyer profile throughout 2012. As an area long popular with professionals working within financial services, certain bands of the market felt the sectors constriction more keenly than other parts of the borough, particularly the 2-5 million price banding. Intrusive tax legislation and mansion tax rhetoric cast a shadow, but with vendors happy to adopt a robust stance, this led to a fall in transaction numbers as opposed to prices. That said, over recent months this price band has enjoyed a significant improvement in buyer appetite, with notable sales being agreed on several properties at previously un-realisable premiums.
Properties of a value below the 2 million threshold have shown significant capital appreciation over the last twelve months, fuelled by both domestic buyers and overseas investor demand. Improved lending conditions, the advantageous currency play and political unrest overseas has bolstered Londons diverse international appeal. With significantly less property available than in recent years, this had lead to strong competition for the best properties.
Sellers in North Kensington are typically up-sizing and a natural migration seems to be north to Queens Park, where interestingly, those sellers tend to be moving out of London altogether. Houses in the St. Quintin Conservation area are in popular demand, where their prices of 1.5 1.8m on average, offer the family market beautiful Victorian houses below the 7% stamp duty threshold. As a result, properties in this area are being snapped up extraordinarily quickly. Equally, we are finding that two-bedroom properties between 500k and 1m with outside space in North Kensington, are just as sought after. We have recently sold a property on Oxford Gardens to a cash buyer, for the full asking price, within just two days! Holland Park maintains its global appeal with half of all sales over the last period and the majority of house sales involving overseas buyers. Large houses have performed particularly well with values in excess of 3,000 per square foot now being achieved on the grander properties. Flats in the super prime locations, including Holland Park itself, continue to be in high demand. Indeed, we have just sold a property within one of the Italianate villas for 2,100 a square foot, after three competing bids.
With Easter out of the way (a month earlier than last year), we are now entering a traditionally busy time for the property market across all prime areas of London. The buyer-to-property ratio is unlikely to change however, as more choice of property will inevitably attract even more buyers to the market. The recent budget has provided clarity for both buyers and sellers, and so, with a renewed sense of certainty, particularly with the absence of both a mansion tax and stamp duty hike to 7% for 1 million property, the sentiment in the market is more positive. A more penal stamp duty levy at 1m would have been bad news for the central London property market, especially as over 60% of property in Prime Central London is now valued at more than 1m.* Buyers are gradually adjusting to the stamp duty increase introduced for 2m+ property last year, although the 2-2.5m market is still experiencing some caution.
In our opinion, the Budget in general, was good news for the property market. The Help to Buy Scheme will provide 130bn worth of mortgage support to buyers at the sub 600,000 level. Whilst this may not have a huge impact on buyers in Prime Central London, it will effectively rescue mortgage prisoners across London and the UK, who have been stuck in their current property, unable to move onto the next stage in their property-buying career. In turn, this will free-up much needed property for first-time buyers, which is depressing supply throughout the housing chain. The scheme will also provide buyers with up to 20% equity loans for new build properties, which we hope will provide confidence to house builders that a ready, willing and most importantly able market, is ready to invest in a much needed supply of new property.
How short is a short lease?
One of the key areas of our work focuses on helping lessees overcome issues that can arise from having a shorter leasehold term than the market would dictate as the norm. We are always surprised by the lack of consideration given to a diminishing leasehold interest, and the general lack of awareness regarding the potential loss of value that can occur if a short lease is not addressed at the appropriate time.
The simple fact is, if a lease is under 90 years, it should be at the forefront of a Lessees mind. Heres why:
We have noticed an upsurge in Lessees, with short leasehold interests, hoping to sell their property, being subjected to lengthy and protracted sale periods due to the fact that purchasers require guidance and reassurance over the costs of extending the lease before completing the sale. This trend is set to continue as capital growth in the overall market will be outstripped by the cost of extending the lease. In simple terms, the capital growth of the Lessees property may be 5% in one year, but the depreciation caused by a diminishing lease could exceed this value. The trend is further exacerbated by the high level of foreign buyers in the market who have a limited knowledge of our somewhat unique English leasehold system.
From July this year, there will be changes in the dispute resolution process, which assists in circumstances where a lease extension cannot be resolved amicably with the Freeholder. The Leasehold Valuation Tribunal, which handles these disputes, will become part of the newly formed Property Chamber (a first tier Tribunal). They will deal with a wide range of property issues, which will mean a reduction in dedicated resources to settle Leasehold disputes and will inevitably lead to less specific funding. So, while the service offered will remain free initially, it is thought by many professionals that a pricing structure for making an application to settle in this manner, will gradually be introduced. This will result in an additional cost for Lessees, on top of the premium paid for the extension and their professional fees. With this in mind, it is therefore more important than ever to address issues of a short leasehold interest, whether you are thinking of selling or not.
Rob Haigh is Head of our Professional Services Department, which offers a full range of in-depth valuation advice on residential properties in central, west and south west London.
T: 020 7368 4843E:email@example.com
Patrick Littlemore assesses activity in the rentals market for the year so far and looks at how landlords should make the most of current demand
Traditionally, demand for rental property in the first quarter tends to be cooler than the rest of the year. This is not to say the market is bad, it just means that landlords need to act smarter and use proactive, experienced agents with the knowledge to steer through more challenging waters. Despite correctly priced properties having little issue in finding good tenants, those landlords testing the market at an inflated price, generally got their fingers burnt. With this lull in activity and an increase in rental property on the market, came a drop, albeit temporarily, in rental yields of between 1-1.5%. Now in the second quarter of the year, and as we draw closer to the busy summer months, the market is hotting up again.
One area of exception to this is Notting Hill, which has been a hive activity, with no let-up, since the beginning of the year. With such a great portfolio of property, 40% of the agreed tenancies were to tenants registered with our other six offices in the Royal Borough or our neighbouring Brook Green office perfectly illustrating the importance of using an agent who can offer an extended network of people and property.
London continues to be the destination of choice for many international rental investors, now more so than ever, which is hardly surprising given the continued financial crisis in the eurozone and this is reflected in the investor demographic. In addition to domestic and international portfolio landlords, an increasing number of our landlords are single property investors. We are also seeing an increase in existing home-owners choosing to hang onto their property and find good tenants, rather than sell when they move.
Rental yields are no longer the primary incentive for many investors. The appreciation of London property prices is the key factor now. For many Europeans especially, the London property market has never looked more attractive: we are not in the single currency, we have a stable government, Sterling is weak and there continues to be a chronic shortage of housing, especially in the Capital. Foreign investors who would play their part in the natural turnover of stock by cashing in on their rental investments, have little motivation to do so at the moment.
As with every year, as soon as the clocks spring forward, the see-saw of supply and demand slowly but surely tips the other way. Eager tenants are keen to secure a property before the summer, causing the very best properties to receive plenty of competition. Now, this increased level of applicants and fewer properties compared with the start of the year, is resulting in higher competition amongst tenants ultimately boosting prices.
In fact, our Corporate & Relocation Services department reported a 15% increase so far this year, compared to the start of 2012, for corporate tenancies across our 19 offices. We found rental property for corporate tenants across a variety of industries and not just banking and oil/gas fashion and media executives also featured highly.
Good tenants are now more savvy, and continue to look for value in the market. When pricing property, there is a fine line between asking just enough and too much and we make sure our landlords dont fall on the wrong side of the line! For reassurance, landlords should familiarise themselves with the competition and to attract the best tenants, they should present their property in the best possible light. If there is a damp spot, dirty windows or fused light bulbs, get these things fixed before putting your property on the market. First impressions count, so spending a few pounds will almost certainly increase the appeal of your property and attract the highest calibre of tenants.
If youre thinking of letting your property and want to achieve the best price, now is the time to act. Summer has a habit of luring tenants away from the thrill of a good property search, not to mention the strongest rental prices.