Market Review Newsletter (Chelsea, South Kensington & Knightsbridge)
Tue 23 Mar 2010
Looking forward to 2010
By William Hughes-Ward, Senior Sales Manager
As we approach the end of the first quarter of 2010, the Chelsea market is starting to get a head of steam with progressively more property coming onto the market and a level of new buyers to match. As a company, we have registered nearly 4,000 new buyers already this year, many of them looking in the Royal Borough. The much-debated issue with the market last year was stock and as we know only too well, if the residents of our area dont want or need to sell, they simply sit tight and wait. As a point of interest, sales in the Royal Borough were down from a 15 year average of 3,048 to 1,409 in 2009 (see graph).
The result is strong activity in the Chelsea market indicating that if youre considering selling then its undoubtedly a good time to do so. Thanks to growing demand and still relatively limited supply, in many cases we are already achieving prices higher than those we were seeing in 2007, when the market was at its peak. Any seller with a desirable property can expect a rapid sale - just last month we sold a property on Walton Street for over the asking price in just four hours.
Buyers should be aware of the haste with which they currently need to make decisions. With so many people vying for the best properties, those hoping to purchase a property this year would be wise to put themselves in as good a position as possible. This means getting your finances in place, (go and see a good mortgage adviser and apply for the mortgage, rather than just having a vague chat with them on the phone); and instruct a good solicitor who has a track record of central London conveyancing. In order to be in a position to buy, which most people are, make sure youre in a proceedable position, which means either having sold your property or having it on the market. If you havent yet put your home up for sale and youre hoping to buy, Im afraid you may just get overlooked.
Traditionally, the market in springtime is far busier than at the beginning of the year, and 2010 has been no different. The upcoming general election may slow things down elections always bring uncertainty which can have an impact on the property market owever our view is that central London, and Chelsea in particular, is a robust and active market place and we remain very positive for our local market for the remainder of 2010 and beyond.
Home grown buyers (including foreign nationals who have already made London their home) purchasing in Chelsea are on the increase. Last year we saw around half of our buyers hailing from overseas now that percentage has reduced to 40 per cent, with many originating from Europe (especially Italy) and also increasing numbers from the Far East. Typically, these buyers are looking for a second or third home for use when they are in the country as youd expect, considering the ongoing mortgage restrictions,were not seeing many investment buyers at the moment however we anticipate that improving as the year progresses.
The majority of our buyers work in finance with 21% in this industry, according to recent research carried out by Marsh & Parsons. The entertainment industry, which includes peoplemusic industries, working in the media and in the film, TV, is the next most popular career choice for a Chelsea dweller at 13%.
Third is marketing professionals, who total 11%. Your other neighbours are likely to be architects, doctors and lawyers.
Buyer profiles collected from active applicants viewing property through the Marsh & Parsons Chelsea Office as of Febuary 2010.
For the next few months I foresee a stable market with steady growth. Price increases seem inevitable considering the current market conditions, where demand exceeds supply. I dont think we should expect the market to power ahead, rather dependable, solid growth to look forward to, with no nasty surprises lurking on the horizon. I mentioned before the impact the general election will have, which may temporarily result in a slight decrease in volume of sales. The market will undoubtedly start moving again, once weve digested who is in power, and crucially, what they are going to do with the budget deficit.
Were lucky in Chelsea to be insulated from many of the issues currently faced by some other regions of the country: any daunting headlines about the property market as a whole can be taken with a large pinch of salt if you live here. Chelsea is a micro-market, with its own laws governing prices. Put simply, it will always be a popular choice, demonstrated by the fact that prices in this area started recovering during springtime last year, a long time before other parts of the country or many parts of central London even caught up.
William Hughes-Ward can be contacted on +44 (0) 20 7591 5570 or firstname.lastname@example.org
By Guy Bradshaw, Senior Lettings Manager
The lettings market has performed an about turn. In contrast to last year, we now have an acute shortage of properties, with demand from prospective tenants far stronger than the supply of rental properties for the first time in over eighteen months.
Last year, many would-be vendors were forced to let, whereas this year weve seen these same accidental landlords deciding to sell as they see the sales market strengthening, leading to a reduction in the amount of property available to rent. The demand for property to let has stayed strong for a number of reasons; there has been an encouraging recovery in Corporate Relocation at all levels - from young executives to families moving internationally as the general economic climate becomes more positive. In addition, were seeing a trend in our clients who have sold their home being unable to find a suitable property to buy, and therefore deciding to rent, happy to wait until there is more choice in the sales market. Another major reason why demand is growing is that first and second-time buyers continue to struggle to secure affordable mortgages with such hefty deposits still being required. I dont see this changing this year, so we can expect demand to remain strong.
With all of this in play, prices have strengthened particularly rents for one and two bed flats across central London. This means that, as a landlord, its a great time to be renting your property. As well as tenants being secured more quickly, theres a very good chance youll achieve a higher rent than last year.
For tenants, whilst prices may be strengthening, there are still some good deals to be done as although rents are rising, they still arent as high as they were in 2007/2008. However, tenants still need to act quickly to secure their preferred property as competition for the best properties is fierce. In a competitive bidding situation, anything that makes you stand out from the crowd will help; if you can commit to a longer period of time say 18 months with no break clause this is bound to put you in an extremely favourable light with a landlord. And if you can pay your rent in advance commonly tenants pay six or even 12 months upfront if they can that too, will undoubtedly help.
Im expecting more investors to return to the buy-to-let market this year. Steady, growing rents are heralding more attractive yields. Realistically, you can expect to see annual returns of up to 5 per cent, and you can be confident that, both medium and longterm, the property market in central London is a pretty safe bet.
I sense a change in perception of the rental market; it is now viewed as a safe sensible, even option and there isnt the same stigma attached to renting as in the past. If you are a tenant there is no risk involved you dont have to worry about what house prices are doing, your level of equity, fixing the roof or the general economy freeing you up to concentrate on other aspects of our life.
Guy Bradshaw can be contacted on +44 (0) 20 7591 5570 or email@example.com
Better News for Residents on the Enfranchisement Front
By Roger Doncom MRICS, Head Professional Services
We know all too well, from our long-standing experience in the Chelsea property market, that the need for a lease extension is not uncommon. If you are considering extending your lease, then there is good news for you. To find out why, read on
The big Estates in central London have, since the inception of the 1993 Leasehold Reform Act which for the first time enabled the extension of leases and the collective purchase of the freehold of blocks of flats by the residents, invested considerable sums of money into contesting the valuation basis adopted under this Act at all judicial levels from the Leasehold Valuation Tribunal, right up to the House of Lords.
The thrust of the decisions has, in the past, largely been landlord friendly thereby increasing the costs of enfranchisement slowly but surely. However, more recently a decision has gone the way of the long suffering lessee which we find encouraging.
As a result the differential between the value of an existing lease and the lease term extended under the Act by 90 years has narrowed (meaning a leaseholder will typically pay less), predominantly for leases in the 30-40 year bracket. This is of course particularly pertinent to the Chelsea and Knightsbridge areas where it has been the tendency for the Estates to grant shorter leases than is the norm in other parts of London.
This differential plays a significant part in the calculation of marriage value within the purchase price.
Since the start of the recovery of Central London property prices in the early part of last year, progress appears to be continuing into 2010 and with the news that statistically Britain does at last appear to have commenced its emergence from recession now might be an excellent time to consider a lease extension of your flat or a collective purchase of the freehold of your block.
Roger Doncom has practised in central, west and south west London since 1973. His accumulated expertise covers both residential and commercial property and in addition to being a Member of the Royal Institution of Chartered Surveyors, he is a member of the Expert Witness Institute. If you require any valuation advice or the support of an expert witness then Roger can be contacted on +44 (0) 20 7348 5990 or firstname.lastname@example.org.