On the Market - Marylebone & Mayfair, Spring 2014
Tue 25 Feb 2014
Bubble or organic growth? That is the question...
The property market is firmly back in the national news again. There are usually only two stories - the market is going up, or its going down. Recently though, a few side stories have been added. Firstly, the Governments interventionist measures to assist first time buyers with the Help to Buy scheme and secondly, the change in tax law to charge capital gains tax on the capital appreciation made by non UK residents on their property investments.
The former does not seem to have affected the central London market, primarily because the scheme is only applicable for purchases up to the value of £600,000. However, Im sure in the recovering regional markets, it will have an adrenalin shot effect.
Conversely, local home-owners have flagged concerns to me with regards to the proposed tax changes. They are worried that it will discourage the large scale foreign investment, which has fuelled the areas rapid price rises. Interestingly however, these concerns do not seem to be mirrored by the buyers themselves, who are investing to diversify their portfolios in what is perceived to be a transparent and legally robust asset. The tax implications havent taken the gloss off their view of our prime areas and they have entered 2014 with the same bullish enthusiasm.
Vince Cable seems to be continually returning to the theme of a UK property bubble and the dangers of boom and bust. But for the most part, his view appears to be based entirely on London. Well all do well to remember that London is not like the rest of the UK, and any intervention to cool it is unlikely to affect our resilient capital, but rather kill off any recovery in the regions, where prices are still below their 2007 highs.
On the horizon, there looms the inevitable specter of an interest rate rise, which will affect those with buy-to-let mortgages. In recent years, lettings yields have been squeezed downwards as capital values rise, so investors have settled for capital appreciation, rather than rental yield, which has been sustainable for borrowers because of record low interest rates. If rental income fails to meet the rising interest payments, then landlords may be forced to sell and cash out. Whilst this may change the dynamics of the market, I do not believe it will affect property values, as the slack will be taken up by other willing buyers.
The amount of good quality property coming onto the market continues to be outstripped by the growing volume of purchasers. At Marsh & Parsons we monitor this ratio as a litmus test of future activity. At the time of writing, we have 22 buyers registered for every available property in Marylebone, and across our London offices, this total is twice as high as a year previously. Sellers choosing to sell their property now are benefitting from the high number of buyers and the possibility of a premium price however, we expect this imbalance of supply to level out as more property comes onto the market in the traditionally busier spring.
Finally, I would just like to touch on a theme I covered in the summer, when I predicted that the area just north of Marylebone Road and west of Gloucester Place was due a price rise, because of the disparity between here and the village itself. To reflect on 2013s autumn market, I can report that we have achieved record-breaking prices in these areas. Most notably, we sold a mansion flat at the Edgware Road end of Crawford Street for 1,460/sqft and a tired house in Molyneux Street for 1,360/sqft. These exceptional prices indicate that the equitable differential has been restored!
Contact David on:
T 020 7935 1775
Chris Coombes looks at the current demand from tenants, including the corporate sector, and why now is a good time to rent your property
Unlike other parts of Prime Central London, where the end of 2013 saw fewer rental properties coming onto the market, Marylebone and Mayfair had plenty of choice for tenants, which has continued into 2014. This is great news for landlords and tenants alike, who are making the most of the current traditional peak in the lettings market.
In general, there is an over supply of two-bedroom properties, due to the way Victorian houses have been converted or purpose-built properties are configured, and this level of the market is very buoyant at the moment. In the £600-£1,000 per week price bracket in particular, supply is outweighing demand, so some landlords have had to lower their expectations. But as always, properties presented in the best possible light will stand out from the crowd and are guaranteed to attract great tenants.
In contrast, there is a very limited number of one-bedroom properties on the market and extraordinarily high demand for these types of properties. Tenants are now favouring spacious reception areas, open plan kitchen/dining areas and outside space, over an additional bedroom. Indeed, since the beginning of the year, almost half of all our tenant registrations are for one-bedroom properties and just this week, we had three asking price offers for a one-bedroom apartment, within 24 hours of it coming onto the market; a scenario thats commonplace in the current market.
The beginning of the year always brings an increase of corporate tenants, who are relocating to the capital with their employer. Marylebone and Mayfair will always be a popular choice for companies and relocatees - the transport links and access to Heathrow are as good as it gets in central London - and we are taking enquiries from corporations who are relocating employees across all parts of their business. In the last quarter of 2013 we had a 16% increase in the number of new corporate enquiries compared to the same period in 2012 - as well as an 11% increase in the number of searches with a budget of more than 1,500 per week.
As is often the case at the beginning of the year, we have seen a flurry of the so-called organised tenants, who serve their notice now, with a view to finding their new home in March. As a result, we are encouraging our landlords with existing tenancies in place, to think ahead and market their property in plenty of time. Our Renewals Department has reported an increase in the number of landlords looking to renew their contract at a higher rent, but many are requesting more flexibility in the term of the renewal, in case they wish to sell their property in the near future. And if they do sell, the supply of rental property could reduce, which in turn, will inflate asking prices.
The rental market hasnt benefited from the same price growth as the sales market in the last year, however this year has started strongly and our experience of previous years points to the market improving even further as we enter the busier spring market. My advice to landlords is this: if you let your property now, youll more than likely secure a long-term contract, at a peak rental price.
Contact Chris on:
T 020 7935 1775