Intellectual Property - Summer 2015 Marylebone & Mayfair
Fri 12 Jun 2015
Certainty restored: Whats next for the London property market?
Now that the dust has settled on the outcome of the General Election, we believe home-owners in London can heave a sigh of relief, confident in the knowledge that the onerous policies of mansion tax and rent controls are off the agenda.
The unexpected Conservative majority does not mean it will be a universally smooth ride for the market. I fully expect the new Government to raise new taxes on expensive property, probably via increased council tax bandings. In reality, this may be difficult to implement so it will be interesting to see how this is proposed. Either way, my view is that property taxes will increase in the coming years. Whilst this cannot be seen as good news for the market, it will do little to dim the attraction of London as a world class place to both live and to do business, and the confidence engendered by a pro-business government will continue to draw in capital and talent from all corners of the globe. We should applaud this as London is, and will continue to be, a huge driver of the economy for UK PLC and we should interfere with it at our peril!
So, what does this mean for property prices? Central London, by definition does not have huge swathes of building land, therefore it seems obvious to me that prices in London will continue to rise. Central London has never been affordable for most people and were kidding ourselves if we think it ever will be. However, the rise in value in Central London has had the ripple effect of allowing developers and builders to look further afield and build high quality property in areas ever further out and I believe prices in adjacent suburbs will continue to increase at pace. Areas where the communications are good and there is a supply of good quality, attractive period properties, will appreciate the fastest and will also appeal to buy-to-let investors. Buyers will however, be prepared to pay top dollar for properties in outer-prime parts of London. Its a fact of geography that however much we try, supply in London will always be limited and with that in mind, prices will continue to rise.
Local Sales Market Update
At the beginning of last year, the supply-demand ratio was 17 buyers for every property in Marylebone & Mayfair, and due to a lack of supply, prices were rising at an extraordinary rate. Conversely, in the second half of 2014 there was a complete shift with the number of active buyers easing significantly and as a consequence, the market stagnated.
As we entered 2015, the market in Marylebone & Mayfair, as with the rest of Prime Central London, returned to a healthier state. We have recorded a 9% increase in the number of properties on the market in the second quarter of this year, compared to the previous, and with a similar increase in the number of buyers searching for property, the supply-demand ratio now sits at a robust and stable 10 buyers for every property.
Along with local interest, were registering buyers from all corners of the globe; traditional interest from the Middle East is still strong however, significant numbers of buyers are now coming from India and Singapore. An international appetite is something were used to seeing in the prime central areas of London, which remains a blue chip investment for the international elite, and a property with a W1 postcode remains an essential element to complete an investment portfolio. The General Election saw The Pound Sterling surge against the U.S. Dollar and the Euro. Despite this making exchange rates less favourable, it has not dampened the appetite of those looking for stable and safe investment and personal wealth platforms to concentrate on central London, and specifically Marylebone and Mayfair.
Demand for quality one- and three bedroom properties between £800,000 and £4,000,000 has continued as the strongest sector of the market. Indeed, we have sold two properties within this range on the same square in a short space of time.
The owner-occupier market has remained cautious and I believe this market will become more active over the second half of the year, boosted by the post-election wave of confidence. With more balanced market conditions and interest rates predicted to remain low. Now is a great time for sellers to act if they are considering a sale.
Local Lettings Market Update
As expected at this time of year, the number of tenants looking for property in Marylebone and Mayfair has increased significantly (up 18% in Q2 2015 compared to the previous quarter), and fortunately, so too has the amount of available property.
Much of this demand is for high quality one-bedroom properties, with tenants favouring spacious reception areas, open-plan, kitchen/dining areas and outside space over an additional bedroom. And when they see something they love, tenants are making quick decisions. As a result, one-bedroom properties are often being snapped up within 24 hours of coming on to the market.
Two-bedroom properties priced at around £650-£850 per week are taking a little longer to rent, but landlords who ensure their properties are presented in the best possible light will attract plenty of attention from tenants; especially those with outside space, natural light and high ceilings the latter being something that many period properties in Marylebone luckily seem to feature!
We have seen a significant increase in the amount of corporate professionals registering with our office directly, as well as with our Corporate & Relocation Services Department and they generally have budgets in excess of 1,000 per week. Marylebone and Mayfair will always be a favourite with corporate professionals given the incredible transport links in and out of the capital and its close proximity to popular areas such as Soho and Fitzrovia.
Our Corporate & Relocation Services Department now works with almost 800 organisations across varying sectors including finance, entertainment, and technology as well as 100s of relocation agents. Indeed, weve seen an astounding44% increase in corporate tenants compared to the same period last year, and expect this to continue as London remains a global economic powerhouse for business. In our experience, these corporate tenants tend to be the most favourable as they invariably have excellent budgets, and spend very little time in the property, so minimising wear and tear.
Whilst Prime Central properties priced over £5 million have faced headwinds over the last twelve months, recent activity has been promising. In a recent four-week period, we exchanged close to 40 million worth of property in Notting Hill alone, with an average value in excess of 8 million; this points to a positive and welcome improvement in market conditions at the higher end of the market. Strong capital appreciation and a good number of transactions in outer London led to a lot of inaccurate commentary in 2014.
In reality though we saw measured capital appreciation for properties valued over £5 million in our central region, and while good premiums were achieved, careful management and profiling remains crucial. With credit markets still tight, constrictive City legislation and greater transaction costs, buyer confidence still needs to be won. This said, with the threat of a Mansion Tax lifted and Londons appeal as a global centre more certain, I believe the 12-month outlook will be positive and look forward to a good activity-inducing period of stability. While international reach is important in the sale of Prime London property, I find its equally important not to undermine the value through haphazard advertising, marketing glare and unwelcome intrusion. Often, our best results are achieved through a highly targeted approach, where discretion is preserved and potential buyers are identified through our existing network; the largest network of offices in Prime Central London. Our Prime Sales Department offers a bespoke service, where our experience and intimate understanding of the Prime London Market enables us to navigate through the difficulties that might otherwise derail transactions.
To find out more about our Prime Sales service, please feel free to contact Keith Gorny, Director of Prime Sales.
Contact Keith on:
T 020 7368 4197
The London residential development market is one of the most dynamic markets in the world. In terms of development activity, the last time the Capital witnessed such a boom in housing delivery was in the 1930s, and much of that was on greenfield land. Whilst much criticism is rightly levelled at an undeniably bureaucratic and overburdened planning system, we should not judge it too harshly.
The statistics below make for compelling reading:
1.Construction starts in Q1 2015 were double what they were in Q1 2014 and 177% up on the quarterly average for the last five years (source: Molior)
2.Total units under construction are double what they were in the previous peak in 2007
3.There are eight regeneration zones being delivered simultaneously across the capital comprising a total of 84,000 units this is an unprecedented level of development! The regeneration zones are: Vauxhall/Nine Elms, Silvertown, Brent Cross, Old Oak Common, Earls Court, Kings Cross, Greenwich Peninsula & Stratford/Olympic Park
To put this into context, since 2008 Londons population has increased by 600,000 to a level of 8.6m. By 2020 it is forecast to be 9m and by 2031 it is predicted to breach the 10m barrier. From a supply perspective, it is well know that London faces a chronic under-supply of housing. What is perhaps less well known is what it will take to remedy this scenario. According to research undertaken for the Mayors Office, London needs to see twice the current increase in house building levels to deliver 42,000 new homes a year until 2035. That is the equivalent of 50% of the combined total units being provided across Londons eight regeneration zones in a single year for 20 years!
Outside of a dramatic overhaul of our planning system and a streamlining of the manner in which development land (and specifically land held in the public sector) is brought forward for development, it is hard to see the demand / supply imbalance being corrected any time soon. All of which means that despite the inevitable ups and downs of a cyclical market, the long term projection for house prices and rents remains upward and it is hard to argue against the consensus forecast of 25% growth in London house prices over the next five years. What is certain however, is that there has never been a more dynamic or exciting time to invest in the London residential development market, given the truly world class supply of cutting edge residential developments on offer.
T 020 7368 4831