On the Market - Pimlico & Westminster, Autumn 2013
Fri 20 Sep 2013
Jake Civardi looks at why demand for property in Pimlico is increasing so dramatically
Demand for property in the Pimlico and Westminster area has remained exceptionally strong throughout 2013. Considering its proximity to landmark institutions and indeed being served by some of the best transport links in the capital, its no wonder that this quiet corner of central London has really made its mark.
Currently, any property that comes on to the market under 2m sells almost immediately, with buyers trying to secure a property without breaching the 7% stamp duty. Indeed we currently have 28 buyers registered for every property for sale through our Pimlico & Westminster office an increase of 57% compared with the same period last year. This statistic clearly illustrates the chronic shortage of stock, specifically in this area, and goes a long way to explain why prices continue to rise with records frequently being broken.
So why Pimlico & Westminster now? Momentum has been picking up in this area for a long time. A combination of factors have made this area an attractive place to invest. If you look at a map of the surrounding area, some of the largest building projects in London are in close proximity. Battersea Power Station, the redevelopment of Nine Elms and the impending American Embassy to the south, as well as the regeneration of Victoria Station and the surrounding infrastructure, not to mention the billions of pounds worth of investment transforming this location into an increasingly residential zone. This, coupled with fantastic transport links and a central London postcode within easy walking distance of the West End, makes Pimlico and Westminster a prime investment hotspot.
Additionally, there is recognition by investors that properties in this area are experiencing extraordinary capital growth. This can be clearly illustrated with a number of recent property transactions. For example, we recently sold a house on Sutherland Street, which has seen an increase of over 20% in sales value in just over two years. This is not an isolated case. Many prime flats in the area have risen by up to 30% Warwick Square for example has recently achieved the dizzy heights of 1,500 per sqft for the most desirable flats, where three years ago the prime apartments were struggling to push through the 1,000 per sqft barrier. As prices have continued to march forward, theres been very little incentive for anyone in Pimlico and Westminster to sell unless they really have to. When stock does come onto the market, it is usually a result of births, deaths or divorce. And anyone who doesnt fall into one of the latter categories is generally able to hold on to the asset as an investment.
Interestingly however, the buyer demographic of Pimlico and Westminster continues to reflect a traditional market, with approximately 70% of buyers from the UK, unlike neighbouring areas where this figure drops to as low as 50%. Nevertheless, an increasing amount of international buyers are discovering Pimlico and Westminster, which is likely to affect the ratio of UK versus international buyers. The beautiful white stucco fronted buildings in the Pimlico grid have now become a starting point for perspective buyers that may traditionally have begun their search in Kensington or Chelsea, but decided that Pimlico & Westminster offers more space with a quiet, village feel, even closer to central London.
As we continue to move through the busy Autumn market, its clear that market conditions are unlikely to change. The increasing number of new developments, due to relaxed laws on converting commercial space into residential, will eventually create a much needed housing boost. There is no doubt that existing properties have ridden a wave of increasing values off the back of new developments being launched at prices substantially higher than the local average, but for how long? Theres never a guarantee for how long a market can sustain itself, but there are a few factors to consider for the coming year. In January, phase two of the Help to Buy Mortgage Guarantee scheme (for second hand homes) will launch and whilst we are not expecting a flood of second hand homes to come onto the market, we may see buyers able to increase their budget slightly in order to buy in Kensington and Chelsea. A reduction in premiums commanded in those neighbouring areas will almost certainly attract a large chunk of Pimlico & Westminster buyers back to their first preference postcodes. Also, the hotly contested topic of mansion tax is likely to come into debate as we head towards the general election in 2015. My advice to anyone currently thinking of selling is to act sooner rather than later if you want to achieve the highest prices.
Christopher Daly highlights the popularity of Pimlico for investors and the demand for premium one-bedroom apartments amongst tenants
The summer lettings market in Pimlico was awash with tenants hoping to beat the autumn rush, and we had a record summer for the number of agreed tenancies. We attribute this success to the increase in professionals moving to the area and the substantial growth in the corporate sector. Demand from tenants is across the board families, corporate relocations, sharers, students and professional couples are all seeking property here.
Currently, about 50% of the landlords we deal with are, what we would refer to, as portfolio investors, who own in the region of 40 buy-to-let properties each. This is far higher than any of the other London areas we cover and testament to how attractive Pimlico & Westminster are to investors from all over the globe. As such, a large proportion of our landlords are foreign investors and equally, 80% of the tenants we let to are from overseas some are already based in London, but most are international relocatees. Indeed its easy to see why Pimlico appeals internationally. The area is on the doorstep of some of Londons most iconic attractions, and the transport links in and out of the city are excellent. The remaining 20% of tenants represent the UK market, who have very often registered their requirements with our Chelsea office, but have been tempted over to Pimlico for its fantastic garden squares and more space for their budget.
Interestingly, in the past 12 months, 50% of the property we have sold through the sales office has come straight onto the lettings market and we have never seen such a wide gap between the few available sales properties compared to the sheer volume of lettings properties. The increased supply of rental property has had some effect on rental prices, which reduced somewhat throughout the summer. However, the increased autumnal demand for properties across the board is now ensuring that prices are recovering well. Properties in the highest demand are premium one-bedroom apartments at around 400 per week, however they need to offer good space and be finished to an exacting standard. We have just rented a fantastic one-bedroom, split level flat on Belgrave Road within 24 hours, after we received three offers for the full asking price of 395 per week. A local competitor said there was no way it would achieve 375 per week! Recently, we have noticed that tenants are much more focused on the condition of their rental property, particularly corporate tenants, who aspire to have the best quality lifestyle.
Our Corporate & Relocation Services department work 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. 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. 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.
One things for sure: Pimlico & Westminster's growing popularity is clear to see. Several new businesses have opened up and theres definitely a buzz of the old and the new mixing together to create a vibrant atmosphere. Its no wonder that this part of central London continues to attract investors and tenants from all over the world.