On the Market - Battersea, Balham & Clapham, Spring 2013
Wed 24 Apr 2013
Liza-Jane Kelly looks at current hot spots for buyers and why the recent budget brought positive news for the property market
Despite some improvement in the supply of property coming onto the market, the growing demand from buyers is ensuring that prices continue to rise and we believe they already have by around 5% since the beginning of the year. With more property coming onto the market, we expect this initial growth spurt to ease as we head into the summer months. Indeed, the buyer-to-property ratio has fallen and now stands at 13.9 buyers for every property, compared to 17.9 in January. We expect to see further growth this year, albeit at a much slower rate of perhaps 2%.
Clapham and Balham continue to be a hot spot for first-time buyers who, often armed with substantial deposits of 40-50% from the bank of Mum and Dad, are snapping up the one and two-bedroom flats. Mostly in their thirties and city professionals, these FTBs are helpfully investing their parents cash, who in turn, enjoy significant capital growth, whilst helping their offspring onto the property ladder. There is less turnover of property at the higher end of the property market although we expect this to improve as the year progresses and the Spring/Summer market begins in earnest. 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 or stamp duty hike for 1 million property, the sentiment in the market is now more confident. In contrast, 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.
Battersea remains popular with families keen to get their children into the excellent local schools, and now even more so with the opening of the Bolingbroke Academy. But its not just local buyers who want to snap up the beautiful family houses between the commons. Interestingly, the last two houses we have sold were in fact to buyers originally registered with our Fulham office who, attracted by the good schools, found that they can get a similar style of property at a more attractive price. Local buyers on the other hand, are coming to terms with the price rises of the last few years. We are currently selling a three-bedroom maisonette on Wroughton Road for 895k, which may seem good value to the north of the river buyer, but when you consider that for the same price, you would have bought a four/five-bedroom house in 2011, its taking some adjustment for those already living locally.
Investor demand remains largely local, however we are seeing more international investment as these buyers seek more value with a healthier yield, in areas such as Clapham, Battersea and Balham. As a result, there is now more rental property on the market, but with it, a seemingly never ending supply of eager tenants, which is reassuring for landlords.
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. This 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:
- As the lease becomes shorter the inherent Market Value of the property will stay the same, however a proportion of this value is beginning to transfer back to the Freeholder and away from the Lessee.
- This proportion transfers at a faster rate as the lease drops below 80 years, making it much more expensive to extend the lease.
- Dealing with the diminishing lease safeguards the inherent Market Value and allows the Lessee to participate fully in market growth.
- Under the Leasehold Reform, Housing and Urban Development Act 1993, a Lessee is legally entitled to a 90 year extension to their current unexpired term.
- Not dealing with the issue can affect the marketability of the property at the point of sale.
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
The first quarter of the 2013 lettings market in and around the common has started strongly. One and three-bedroom apartments were, and still are, in huge demand, attracting sealed bids within days, or often within hours of coming onto the market. This has, in some cases, significantly pushed up rental prices. Indeed, we have just let a three-bedroom property on Netherford Road in Clapham for 14% higher than last year. Two-bedroom flats on the other hand, were in over supply, mainly due to an influx of buy-to-let investors swamping the market. For years, two-bedroom properties have been considered the best rental investment, with the widest appeal, but some landlords have experienced a rental drop of up to 8%, compared to the same period last year. However, the basic supply and demand principal still exists, and as we move into the busier summer market, this demand is already rising. Well presented two-bedroom properties in sought-after locations will not sit un-let for long especially if they have a garden and we expect prices to catch up again in the second quarter of the year.
That said, 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.
In all areas of Clapham, Battersea and Balham, the professional sharer appears to be the most represented type of tenant for flats. They are slightly more price sensitive, as they are, more often than not, saving hard for a deposit so that they can buy their own property a few years down the line. However, there has been an interesting emergence of tenants who have resigned themselves to the fact that buying is currently an unrealistic option as prices rise. They are willing to pay a premium for a higher standard of living, foregoing any savings generated through a more frugal existence.
Additionally, we have seen a 15% increase since the beginning of the year in the number of corporate applicants registering with Corporate & Relocation Services department, looking for rental property in Clapham, Battersea and Balham. With rental prices in central London continuing to rise, the psychological Thames barrier has been been breached and with the completion of the South London Line extension, the commute into Canary Wharf is now just 20 minutes from Clapham High Street.
Since the Easter break, the house market has woken up. Keen to get ahead of the market and settle before the summer, families are starting to move. If children are in the mix, competition will get fierce over the next few weeks, with parents literally battling to get the right house, in the right street, that falls within the catchment areas. In fact, we have just rented a house to a family, on Berber Road, SW11 within days of it coming on to the market the key driver being the fact it was next to Belleville School!
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 that 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 tenant.
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.