On the Market - Kensington, South Kensington, Chelsea & Earls Court, Autumn 2013
Tue 17 Sep 2013
Craig Tonkin looks at continuing high demand across differing price ranges in The Royal Borough
Confidence in the Prime Central London property market continues to go from strength to strength and with record low levels of property available for sale, we expect prices to continue to strengthen for the remainder of 2013.
Properties in this area are almost exclusively being bought as luxury assets, rather than short-term investment vehicles to return a quick buck (other non-prime areas offer more attractive rental yields of 3-5% compared with just 2% here). Indeed, this could explain the shift of buyer profile in Kensington and Chelsea. In 2012, 70% of buyers were foreign, featuring mainly Middle Eastern and Europeans 75% of whom bought with cash finance. This year however, weve seen a shift, with domestic buyers accounting for approximately 70% of purchases. This has had a knock-on effect on transaction times, which in most cases, have doubled a direct result of these buyers using inexpensive mortgage finance.
In South Kensington, properties priced between £600k and £2m continue to fly off the shelf, with many young buyers aided by the bank of mum and dad. The house market continues to experience a bottle neck in demand for houses over 2,000 sqft from high net worth city folk, specifically French, American and Italians who compete to secure a property under 2m and that all important 7% stamp duty threshold.
Interestingly though, in Kensington, Chelsea and South Kensington, our most sought after properties are those priced between £2.5m and £5m. As these properties are more scarce, our database of well qualified buyers, across our seven offices in the Royal Borough means that many properties are under offer before weve been able to even prepare the marketing material, by those waiting to pounce when the right property becomes available.
Earls Court, continues to be more competitively priced than the rest of the Royal Borough, although the discount available toRBKCbuyers is reducing as the area continues to gentrify. Indeed, if we look at prime garden squares, this time last year, properties were commanding in the region of £1,250 per sqft, whereas now, prices are in the region of £1,400 £1,500 per sqft.
Another example of just how far prices have come in the last five years is a two-bed in Harcourt Terrace that we sold in 2008 for £595k. An almost identical apartment has just sold for over £1.5m. As we move into the Autumn market, we will experience continued high demand for property. There is now a positive feel in the air the lower end of the market is experiencing an uplift in transaction numbersaided by government initiatives including the Help to Buy scheme. This, although not having a direct impact in this area, is freeing up valuable mid-ladder buyers and will no doubt be accelerated in 2014 with the introduction of the Help to Buy Mortgage Guarantees for home movers (not just first time buyers). For this very reason, now is a great time to sell your property the hopeful increase in stock levels next Spring, will likely impact premiums currently being paid for properties in the area.
Keith Gorny looks at why a failure to recognise the nuances of the different property markets within London can create a misleading impression
As reported elsewhere in the media and indeed in our own research, the property market as a whole, has enjoyed some exceptionally positive activity. However, these figures are heavily influenced by dramatic capital appreciation in the sub £2 million category, where there has been a significant increase in both capital values and transaction levels.
Given recent press coverage you would be forgiven for thinking that Londons prime central property market has enjoyed a universally positive twelve months, with insatiable demand and limited supply conspiring to inflate prices to stratospheric levels. The general consensus is that prime central values are as much as 60% up on their Spring 2009 low and while our results support this claim, it is not a figure that can be applied uniformly to all properties within our region. Broad brush reporting is attention grabbing and indicative of wider trends, but it can often be very misleading. Nowhere is this more apparent than in the residential property market, with its multitude of diverse niche markets. Until recently more useful reviews in the main have differentiated through geography Prime Central London, Prime South West, The South East etc. However, with the advent of intrusive tax legislation and the globe trotting nature of wealth, the price banding in which a property falls is having a greater influence on its likely performance in the market.
A reduced and more regulated financial services sector, tax concerns and uncertainty over future policy manifested itself in fewer transactions in the £2m to £10m bracket over the last two quarters. Having compared notes with my associates across the industry, weve experienced a higher percentage of properties withdrawn after failing to meet the vendors price expectations.
It has been equally as challenging a period for sales north of £10m where buyers have become increasingly price sensitive and reluctant to commit. Perhaps as stability improves elsewhere, the rush to safety becomes less frantic. Land Registry figures suggest transactions remain approx. 50% per annum down on their pre 2008 levels - I suspect the actual figure may be worse given that a number of these recorded sales were nothing more than the tax efficient reclassification of owner assets.
This all said, we have achieved some excellent results over the last six months. Intelligent pricing and careful profiling has helped us to achieve new highs in the north west of the Royal Borough. Further south, a large apartment sale that we are handling attracted a bid of £4,000 per square foot - a precedent price in the area. Achieving the best results is as much of a challenge now, as it has been in my twenty years of working within the super-prime market. An agent needs to proactively win authority, develop a buyers trust and engender confidence in the price being sought. In these less certain times, the best results are only being achieved by the most competent and experienced agents.
Verity Barrett looks at current trends in the rental market including the differing demands for one and two-bedroom flats
The summer lettings market in prime central London was awash with tenants hoping to beat the autumn rush a welcome arrival for landlords, who earlier in the year, had suffered price drops due to an imbalance of supply and demand. September, traditionally the busiest time of the year for the rental market, has brought a new round of tenants and the best quality properties are renting quickly.
In recent months, we have noticed a change in the requirements coming from tenants, who are placing less emphasis on the size or location. They are now seemingly, far more focused on the condition of the property. Corporate tenants, whether international or domestic, dominate this section of the rental market where their desire to have the best quality lifestyle is dictating their renting decisions. For example, we recently received an offer of £1,000 per week for a one-bedroom apartment in South Kensington (of just 700sqft), simply because the flat was of an extremely high specification.This shift in priority has made it impossible to place a valuation on a property without seeing it first. Such is the importance of quality, over size and location, we wont even risk providing a speculative value to landlords.
Interestingly, each of the areas in this part of London are seeing very different trends. There is a shortage of two-bedroom properties between £700-£800 per week and a continued, insatiable demand for one-bedroom properties at circa £550 per week in Chelsea, South Kensington and Earls Court. In contrast, Kensington actually has a mild over-supply of one-bedroom properties but a shortage of two-beds up to £900 per week. We also have a healthy demand for four-bedroom family houses at £1,500-£2,000 per week in the Royal Borough, which in contrast to many other parts of London where it can take several weeks to find a tenant, we are securing tenancies very quickly. Across the board, first floor period conversion apartments on quiet residential streets are tending to attract the most interest, particularly from European tenants seeking classic London living with high ceilings and large windows.
Our Corporate & Relocation Services Department works with a number of relocation agents and businesses of varying sizes. In the last year, they have reported a 42% increase in the number of high-end searches, which we consider to be £1,500 per week and more. These budgets have recently been as high as £8,000 per week! With companies becoming increasingly global, the need for experience across all markets is seen as a key attribute for future leaders, so there is now a focus on relocating their senior staff. This trend is two-fold - an increase in corporate tenants relocating to London, at the same time as local home-owners moving abroad for several years and renting their home until they return. Just a few years ago, these same companies were preferring to relocate more junior employees to save on ex-pat packages.
In our experience, Corporate tenants tend to be the most favourable. They invariably have excellent budgets, they spend very little time in the property so wear and tear is kept to a minimum and most notably, they almost always have a regular cleaner to keep the property in great condition.