On the Market - Pimlico & Westminster, Spring 2013
Thu 25 Apr 2013
Jake Civardi looks at the increasing demand from buyers based in neighbouring areas and why the Budget was a good news for the property market
Property prices in the Pimlico and Westminster area have grown significantly in the last couple of years, arguably faster than any other area of London. Phenomenal demand from a steady stream of both investors and cash-rich home buyers has fuelled this growth, as has a continued shortage of property on the market. That said, recent growth has steadied somewhat, and we are now moving towards a more sustainable rate of increase. The number of buyers registered for every available property now stands at 22.1, compared to 18 in January earlier this year, however with more property coming onto the market, we expect this ratio to ease again in the coming months.
In the last year, approximately a third of properties sold through our Pimlico & Westminster office have gone straight back onto the rental market with our lettings team. Significant price growth over the last few years has persuaded many investors, who would traditionally look in neighbouring Kensington and Chelsea, and those savvy enough to appreciate all that Pimlico has to offer (including a healthier rental yield and fantastic transport links), to snap up one and two-bedroom properties. Interestingly, a large proportion of these investors are actually domestic, as opposed to international the latter preferring to stick to what they know, by investing in new build and a K&C postcode. The domestic buyers have very often sold their properties in Kensington or Chelsea and are cashing in to move to the country, with enough capital to keep a foot in the London-property door. And so, they are choosing Pimlico or Westminster as a great investment alternative.
The area is however, catching up with its neighbours in value terms. The prices being achieved are in the region of 1,000 plus per square foot, whereas a couple of years ago buyers were looking at circa 800 per square foot. This represents excellent capital growth for those who realised Pimlicos potential earlier, at the same time as offering good value for astute investors being at least 30% cheaper than a comparable Chelsea property. As an example, we have just sold a four-bedroom house on Ponsonby Terrace SW1, for well in excess of 1,000 per square foot.
There has been relatively little activity in the house market, due in part to houses representing only 15% of the local market, but also due to would-be sellers hanging onto their bricks & mortar asset. That said, when a house does come onto the market, it will attract huge interest and in many cases will sell for a record price. As is traditionally the case, we believe that most of the years price growth will have happened in the early part of the year, meaning that now is unquestionably a great time to start thinking about getting your house on the market.
There are currently particular hot spots for buyers and indeed investors. In Pimlico, the two/three-bedroom Victorian conversions are extremely sought-after and selling for a premium, particularly those on the garden squares and in the popular Pimlico Grid. Equally, in Westminster, the portered, period mansion blocks are very desirable, and very often sell within just a few weeks of coming onto the market.
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 recent budget has provided clarity for both buyers and sellers, and so, with a renewed sense of certainty, particularly with the absence of a mansion tax and no sign of a 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, are ready to invest in a much needed supply of new property.
Contact Pimlico & Westminster Sales Team on: T 020 7828 8100 E email@example.com
Christopher Daly looks at the changing demands in the Pimlico rental market and how landlords can secure the best tenants
Traditionally, demand for rental property in the first quarter of the year tends to be cooler than the rest. This year has seen a busy market, but one that has needed 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 for 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%.
In the second quarter of the year, and as we draw closer to the busy summer months, the market is hotting up again. Two-bedroom flats have been in over supply, mainly due to an influx of buy-to-let investors swamping the sales 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 principle still exists, and as we move into the busier summer market, this demand is already rising rapidly. 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.
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 amount 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 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. And as youd expect, those two-bedroom garden flats that were near impossible to rent in Q1, are increasing in popularity as the evenings get longer and warmer.
Now, an 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, weve seen a 15% increase since the beginning of the year in the number of tenancies agreed with through our Corporate & Relocation Services department, in Pimlico & Westminster. These tenants are often preferable, as in most cases they are able to offer at least six months rent in advance and commit to longer tenancies. We recently rented a three-bedroom flat on Ashley Gardens to a corporate tenant at the full asking price, within days of it coming to the market, to a Spanish banker whose children attend Eaton Square School. Also, we recently let an apartment to a foreign embassy, who paid the full year up front, and for 7% more than we let it for last year. Good tenants however, are now more savvy and continue to look for value in the market. When pricing property, there is a fine line between seeking the best level and asking 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 making the property more presentable will almost certainly increase the appeal 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.
Contact Pimlico & Westminster Lettings Team on: T 020 7828 8100 E firstname.lastname@example.org