Intellectual Property - Notting Hill, Holland Park & North Kensington, Summer 2015
Mon 15 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!
"We should applaud this as London is, and will continue to be, a huge driver of the economy for UK PLC
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.
Peter Rollings,Chief Executive
Local Sales Market Update
Weve had a very positive year so far in the Notting Hill, Holland Park and North Kensington property markets. Much more than we were expecting given that the fi rst part of the year was consumed with uncertainty about the election result. In fact, locally, house sellers and buyers continued with their lives and those needing to move, did so. However, now that the result is known, we have seen the market pick up pace and the number of buyers and sellers have both risen. We are now recording a healthy average of 15 buyers for every available property.
Whilst the £2m+ market was a little slower, not just this year but since previous stamp duty increases, we are seeing this shift and the pent-up demand is now ready to buy. We were marketing a house on Portobello Road for some months at £2.95m and our client eventually accepted an offer for £2.65m just prior to the election. Following the Conservative win, there are now several more offers for the same property. At the time of writing, both were very close to the original asking price and we may even see these increase further. Typically, the types of sellers we are working with are 50% investors, who are cashing in on their investments and 50% trading up to nearby areas such as Brook Green, Queens Park and Chiswick - or in some cases relocating abroad with work. In Notting Hill, as always, fi rst-floor period conversions are in the hottest demand from buyers and these types of properties will always receive a premium. One-bedroom apartments priced between £500,000 and £700,000 are equally sought-after as they make such good rental investments and as long as they are priced correctly, they will sell well.
In North Kensington, a third of the properties we sold this year were to buy-to-let investors purchasing on behalf of their offspring and renting to tenants until their children are old enough to move in. Two- to three bedroom lateral apartments are particularly sought-after in W10, and if they have a roof terrace or garden, are likely to achieve a 10-20% premium.
It has been interesting to see a shift in how the price per square foot values have changed over the years. Of course, these have risen across the board, however its a new phenomenon that over the past few years properties at the lower end of the market command the highest price per square foot.
Traditionally, the bigger the property, the higher the value, but recently this has very much reversed. It will be interesting to see if this shifts back, now that the idea of a mansion tax has been removed. Theres plenty of regeneration taking place in the area; Golborne Road is going through a major smartening-up phase; there are new plans for northern parts of Portobello market; and there is extensive work happening at Queensway (and rumours that this area might be pedestrianised), so there is no doubt that this pocket of London will continue to grow in popularity. I see no reason why property prices wont continue to rise, albeit at a slower pace than we have witnessed in the past. All in all, I anticipate an annual rise of at least 5% by the time we reach the end of the year.
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
As always at this time of year, the lettings marketing in Notting Hill, Holland Park and North Kensington is fi ring on all cylinders and whilst we have 8% more tenants looking for property now (Q2 2015), compared to the previous quarter, fortunately, we also have an increased supply of property on the market. That said, we currently have eight tenants registered for every available property, compared to six in the same period last year, which is a clear sign that competition for the best properties is very hot.
The trend towards couples preferring larger and more luxurious one-bedroom flats rather than average two-bedroom flats continues from last year. However, we are noticing that more couples are seeking, and successfully renting, high-end two-bedroom flats, at good prices because there are simply more properties of this type available.
The market is seemingly shifting from the majority of younger, professional sharers towards slightly older couples (28-40 year olds) with dual incomes, due to price rises in the sales market making it difficult for them to get onto the property ladder. Often, they are seeking luxury flats and have budgets of £800 per week or more. Also, weve been working with a large number (more than usual) of tenants who are already renting in the area and up-sizing to more luxurious properties.
Interestingly, we have seen an increase in home-owners re-mortgaging their first home as a rental investment and then buying a second. This has lead to some unusually high quality property coming onto market - and these are invariably decorated and furnished to owner-occupier standards, rather than specifically for rental. This is helping to meet the demand from higher budget tenants and very often were receiving multiple offers for these properties, which is resulting in offers that can significantly exceed the asking price.
Bayswater continues to offer good value compared to W11 and with recent infrastructure improvements at Paddington and the planned changes at Queensway, including the new John Lewis store on Porchester Terrace, the profile of the whole area has improved. Additionally other development and regeneration projects in the area continue to build upon the landscape and attract tenants and landlords alike. Leinster Squares change of use back to residential units and townhouses, as well as Portobello Square at the North end of Ladbroke Grove have both improved the area vastly, not forgetting the recent addition of the Kensington College and Leisure Centre on Silchester Road.
In contrast to earlier in the year, larger family houses are currently in short supply. Though well-organised tenants are making plans earlier than ever, we are already seeing competitive situations in the house market and at the time of writing, we had three offers in one week for a house on the market at £2,200 per week.
The area continues to attract an increasing number of corporate tenants, either those coming from abroad or outside of London. 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 astounding 44% 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.