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Market Review Newsletter (Notting Hill & Holland Park)

Thu 01 Oct 2009

Expanding our service

By Keith Gorny
 

After the fast paced drama of the preceding eighteen months the summer offered a welcome period of relative calm in the Central and West London housing market. An increase in confidence and a supply/demand imbalance has assisted in a rapid recovery with prices being supported at a level few had anticipated at the beginning of the year.

Marsh & Parsons have accounted for over 20% of all sale transactions in the Notting Hill/Holland Park area this year, our results support the encouraging view that our local market has passed a low point in terms of both values and activity.

The national picture has grown more positive with all indices showing a decrease in the rate of house price decline and that demand for property has risen, albeit from a very low base. The Bank of Englands mortgage approval figures, while well down on levels seen during the housing boom, have been rising month on month since their January low.

While reviewing recent activity in our local area this report will assess the evidence to suggest whether or not, after 15 years of house price rises ending in the worst financial crisis since the 1930s, this recovery will be maintained.

 

What is certainly true is that a good result in this delicately balanced market requires an experienced estate agent who contributes real, discernable value to the sale process. Marsh & Parsons clients benefit from the largest, most experienced team in the area and an ever greater investment in the marketing of our clients properties sees our Notting Hill office expand into larger premises this month. We do hope you will have the opportunity to drop by.

Last couple of Months: Recovery

The national market remains very uncertain, susceptible as it is to the risk of further increases in unemployment and a lack of support from first time buyers who still find it hard to get accepted for a loan without a large deposit and impeccable credit history.

Our cash rich, part internationally fuelled, local area is less dependent upon a functioning mortgage market than a recovery in sterling where a sustained rally against other major currencies could see demand from our international buyers soften. But for prices to fall back we would need to see a significant increase in supply.

Over the last year few crisis sales have materialised in our area and it would come as a surprise if they were to now, in more stable conditions. Property investors look set to remain in property while interest rates remain low and alternative less tangible investments remain volatile. In the short term we believe we are unlikely to see the large increase in supply needed to undermine current values.

The single largest contributing factor to the well being of our areas property market is the health of the City. Over the last quarter we have noted a significant increase in the number of City based buyers committing to the market. This has contributed to an improvement in prices that has begun to tempt more sellers to the market. This improved supply is intrinsically linked to the prices that can now be achieved, we believe a balance is being reached where supply and demand will stabilise values close to their current levels.

Fig 1 Improved demand and the tight supply of houses has seen values rise sharply this year. Recent notable sales on Portland Road, Ladbroke Road and Kildare Gardens have been at prices close to those being achieved in 2007. There has been a better supply of apartments and with greater dependence on mortgage finance than at the higher end of the market recovery has been more measured.

pound_per_sq_ft2_Notting_Hill_Holland_Park_Marsh_and_Parsonsbuyer_employment_trends_Marsh_and_Parsons

Fig 2 The influence of the financial services sectors well being on our local housing market is clear.Greater job security and the rewards of improving results should support current values despite the anticipated increase in property supply this Autumn.

local_national_buyers_with_Marsh_and_Parsons_portraitcash_v_mortgage_09_Marsh_and_Parsons

Fig 4 As property values are seen to stabilise we should see an improvement in the lending markets which will inevitably contribute to an improving landscape. Interestingly the ratio of mortgage to cash financing over our last quarters activity are in line with the long term average.

Looking Forward: Maintaining Appeal

As other economies emerge from recession the threat to our international buyers from a strengthening pound should diminish, however, growing economies now go hand in hand with rising oil prices. The inflationary pressures of the latter would prompt a rise in interest rates that could produce the type of increase in the supply of properties that would undermine values. But its an ill wind. the fortunes made and enhanced during the last commodities boom of 2007 and early 2008 were, in part, ploughed back into Central/West London property, invigorating our local market, particularly at the top end. The positive news provided earlier within this report details a recovery from record lows and there are still many uncertainties in the economy. It is clear that while our area continues to attract an eclectic mix of buyers, for this recovery to be sustained Londons appeal as a global financial centre must be maintained. Deteriorating employment prospects in the City would impact our areas property market more than most. Londons highly skilled workforce, infrastructures, culture and fortuitous time-zone ensures its global appeal I believe we can be confident the financial quarter will reassert itself if future regulatory policy allows it. At the time of writing the worlds finance ministers and regulators are meeting to agree upon common international legislation to govern the financial services industry. Lets hope the measures taken promote stability without crushing the entrepuneral spirit.

Lettings Comment: Recovering Rental Prices?

By Emilie Thysse

The lettings market over the lastyear has been dominated by themost challenging market conditions seen by landlords since 2001. However, Im pleased to say that the market seems to finally be stabilising. The influx of properties onto the market, largely caused by vendors unable to sell being forced to let instead, has slowed significantly. The reduction in properties entering the lettings market, combined with the seasonal summer peak in demand from tenants, means the supply and demand ratio has returned to more normal levels, therefore halting the tumbling rental prices, which particularly in Kensington & Chelsea have dropped by as much as 30% over the past 12 months.

Since June this year, we have seen an average of one in five prospective tenants finding themselves in competition with another party when making an offer on a rental property, meaning that landlords are more commonly achieving their asking price or close to it. That is not to say that prices have or will recover overnight the recovery in rents will of course take time but it is true to say that they are no longer falling and the void period for landlords is lessening. More frequently, asking prices are being achieved, not just because of the increased demand from tenants, but also due to wise landlords listening to their agents advice on the prevailing market conditions and adjusting their rents accordingly. Similarly, tenants are beginning to realise that the dramatic rent reductions theyve been enjoying are no longer the norm and decisions need to be made more quickly. For example, a large house which recently came on with us on Kensington Park Road had three viewings within 24 hours of being placed on the market and after two competing bids, it was let at asking price to a corporate tenant - only four or five months ago this might have taken weeks to let.

Corporate relocation has seen a reassuring recovery in activity since the financial crisis significantly reduced the usual levels of activity particularly in areas like Westmi ster and Kensington & Chelsea which are a favourite with City executives. The summer is traditionally the busy season with large numbers of corporate tenants entering the market, ranging from senior executives relocating with their families to graduate new starters, and Im pleased to say that this year has been no different, despite the more challenging economic times. Although many City firms have altered their relocation and recruitment policies to some extent in line with the current climate, the level of corporate activity in the lettings market this year has been encouragingly high and is a strong indication of a more buoyant outlook as we move into autumn. In July our Corporate Services Team saw an increase of 30% on their average number of searches per week for the year to date. Our commitment to providing our corporate tenants with the very highest service levels during their tailor-made property search continues to attract more new companies and relocation agents looking to work with us for their property searches. With hundreds of properties available for let and for sale across London, we are able to meet the needs of a huge variety of individual employee relocation requirements from some of the worlds most prestigious companies.

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