Market Review Newsletter (Notting Hill, Holland Park, North Kensington & Brook Green)
Wed 24 Sep 2008
The value of experience
By Keith Gorny, Director
As in all of London, the development of our area is peppered with tales of boom and bust. A multitude of investments that made fortunes while others were lost. It is a story that can be read in the stunning architecture that surrounds us today. The third Lord Holland and James Ladbroke were the first to appreciate the value of the area in creating the Holland Park avenues of detached mansions and townhouses of Ladbroke Square beloved of the worlds wealthy today. However, both developers were severely hit by the financial crash of 1825 and the subsequent slow down in building resulted in the surrounding land being given over to horse racing and the short-lived Hippodrome Race Course. As the race course failed and the market returned to normality the land reverted to Ladbroke and was re-leased for construction and a fortune was rebuilt. The magnificent villas that constitute Kensington Park Gardens, Stanley Crescent and Lansdowne Crescent resulted. Similar tales involving speculating Reverends, Calcutta Merchants, Colonels and watch makers abound, littering the path to where we are today - living and working in one of the very finest and sought after locations on the planet.
Marsh & Parsons have traded through the markets ups and downs since 1856, including the Great Depression of 1929, the years after the Second World War, the oil crisis of 1973/4 and more recently 1989-94. The London market has now been falling for over a year and the extent of the bad news has been quite shocking. At the time of writing Lehman, HBOS and Bradford & Bingley constitute the latest casualties of the Credit Crunch. This further knock to confidence signals the loss of thousands of jobs in the sector that provides us with a significant number of buyers (see figure 3). However I see light at the end of the tunnel. After weeks of turbulence on the worlds stock markets the modified U.S bail-out is being put into place, a lead that European governments look set to follow. Oil prices are down and inflation is set to fall rapidly which will lead to a reduction in UK interest rates. Increased regulation in financial services may reduce profitability but it will provide greater stability and help restore confi dence in the shattered lending markets. While the housing market may not continue to perform with the exceptional dynamism of recent years things will stabilise and I suspect provide us with a much calmer period moving forward.
In tougher trading conditions good estate agents thrive. They can add real, discernable value to the sale process and while the environment is undoubtedly more challenging, the case studies to follow show that Marsh & Parsons continue to achieve excellent results for our clients.
The last couple of months: The Summer Market
In the first six months of 2008 Marsh & Parsons conducted over 25% of the sales completed in the Notting Hill area. (Source: Land Registry)
The media continued their reporting of the statistics produced by The Nationwide and Halifax, both of whom claimed small monthly falls over the last several months that amounted to over a 10% fall from the July 2007 peak. This does not refl ect our experience. In this more informed era of high speed communications, the majority of our clients were quick to recognise the direction of prices and were appreciative of buyers reluctance to acquire a depreciating asset. Owners adjusted their prices rapidly and sharply (in some instances by as much as 20% from the peak) in order to sell. This was a pill made easier to swallow by the fact that sellers had greater opportunity to negotiate on related purchases.
There is no denying that confidence has been knocked with the realisation that in The New Age of elaborate securitised debt, house prices can go down as well as up. The Globalisation that provided a decade of low inflation, which in turn permitted low interest rates that underpinned strong economic growth and rapid asset appreciation with an accompanying, flourishing financial sector, appears to have had a sting in its tail. While the availability of finance for property purchases has been the single biggest shock to the wider housing market, in our equity rich environment (average loan to value rate in Notting Hill is an astonishingly low 26% according to a recent Experian report) job security in the closely linked fi nance sector has been the bigger contributor to what was a more subdued period of activity.
While some buyers held back in the hope of further falls and greater choice, a significant element were getting on with their lives and were in the market buying at what appeared good value. Only time will tell who was financially the wiser. However, what we do know is that the choice of housing available to people to buy is reducing. Supply in our area tends to improve with demand and falls away in more difficult times, a trend that provides our property values with some solid support but narrows the options for those buyers that hold out too long.
Case Study: Pembridge Crescent W11 - SOLD for 925,000
As supply continues to contract, a growing number of buyers are recognising that the opportunity to find the right home and negotiate fair terms is diminishing. The buyers of this apartment on Pembridge Crescent (which sold in July) agreed the sale on the Monday before going on to exchange and move in by Friday of the same week.
Now: Diminishing choice is creating competition for quality properties
The summer exodus has had its usual impact on volume. Having five offices covering the Notting Hill/Holland Park/Bayswater area, Marsh & Parsons retains a higher number of buyers on the register than any other agent - during August over 35% of our automated email property notifications to buyers were returned by Out of Office replies!
While gloom continues to be reported against a backdrop of job losses and falling values, a growing number of buyers were growing frustrated with the wait. For some the practical necessities such as children and marriage are applying increasing pressure to move. Having completed a healthy level of transactions over the last period, Marsh & Parsons stock levels are lower and any new launch is being met with real enthusiasm as our recent Portland Road sale demonstrates (see below).
While the correction in property prices may not be quite complete, it is certainly well advanced and it is a very brave buyer who risks missing the bounce by trying to spot the absolute bottom of the market. Buyers are now responding to the value that the market is offering. While we are agreeing the majority of our transactions with purchasers who have been registered with us for some time, we are now seeing the return of buyers who had opted to rent this time last year. The best buyers are often coming through the door within the fi rst couple of weeks of a property being marketed; the early offer is often proving to be the best offer so launch price is crucial.
While sales are for the most part being agreed at lower levels than the highs of last year, given our equity rich environment there is little forced selling and vendors still need to be encouraged to sell. Where properties are presented to the market effectively and negotiated through experienced agents, excellent premiums can be achieved.
Case Study: Portland Road W11 - SOLD August 2008 2.5m
The Portland Road house marketing campaign that prompted the feedback below ran during the end of July and the beginning of August 2008. We conducted over seventy viewings and produced three separate buyers before selling the house for its 2,500,000 asking price a record value.
I just want to say a huge thank you to you both, and indeed all the negotiators at M&P. I know how hard the whole team has worked right from the day I appointed M&P. The level of viewings has been outstanding and the enthusiasm and professionalism from everyone has been evident. (The buyers building surveyor even commented on how accommodating and friendly you were). To have achieved such a great price, in such a short timescale in this difficult economic climate is incredible. I have no idea where you found the buyers, I am still pinching myself to check if this whole thing is real! Anyway, thank you so much for all your hard work and experienced negotiations in this.
Going forward: Long-term demand
There is a symbiotic relationship between the economy and the housing market with weakness in one driving a weakness in the other. With various data showing a deteriorating pattern for the economy, we can expect headlines to continue reporting falls in the national housing market. As already discussed, our local market in London is far more advanced than the UK market as a whole and I suspect time will prove this to be a period of opportunity in prime London. The property market is always the first to enter any downturn and consequently the fi rst to emerge; usually months before it is reported in the media.
While I suspect the banking sector will continue to contract and additional shocks are to be expected, there are some encouraging noises. Oil prices have retreated sharply from their record high in July, alleviating some inflationary pressure and there have been some recent improvements in mortgage product availability and fixed term rates. As a result, we are seeing an increase in the number of transactions being agreed at all price levels.
Even if the twin shocks of high commodity prices and financial turbulence fail to fade away over the remainder of 2008, Londons broad global appeal and limited supply will ensure values are underpinned at respectable levels. High equity values and the excellent rental alternative cushion most against forced selling. It is Londons agility; its ability to reinvent itself and to capitalise on new, ever changing trading conditions that has made it the global city it is today. Our Capitals development has progressed through countless economic cycles and will emerge from this one better placed than ever to take advantage of the experience.
Previous periods of prosperity resulted in building booms that created over supply as the economy contracted, thus intensifying falls in property value. With limited building space no such construction boom occurred this time around. Without doubt we will be in increasingly urgent need of new properties to satisfy Londons ever-increasing population.
Lettings: Success in a competitive market
By Emilie Dawes, Lettings Director
The summer months have seen the number of properties on the market for lettings reach an unprecedented high. Many people trying to sell their homes earlier this year have been unable to achieve their desired prices, so have decided to market their property for lettings instead. This has lead to a dramatic increase in available property to let in August 2007 we had a register of around 360 properties in our Kensington & Chelsea and Westminster offi ces. This year we have a register of 618 properties a 72% increase.
Whilst tenant demand is currently at its seasonal peak (June to October being the busiest months), the volume of property on the market continues to exceed demand, softening prices as the level of competition between landlords drives rents down by, on average, 5-20%. Indeed the oversupply of property means tenants have more options and have become correspondingly demanding with high expectations in terms of condition.
However, landlords should not perceive the softening prices to be all doom and gloom! Despite the intense competition between landlords, the overall volume of properties being successfully let has increased by 48%. Our success in this exceptionally competitive market can be attributed to the exposure the properties receive when marketed by Marsh & Parsons. With such intense competition between landlords, attracting and securing tenants is only achieved by effective marketing by an agent with a strong brand and proactive staff. Access to the right tenants is crucial and at Marsh & Parsons our Corporate Services Department ensures our landlords have exposure to the best tenants.
Interestingly, many relocation agents with whom we work closely are reporting an increase of new clients relocating staff to London, all of whom will register their property searches with Corporate Services. In particular, the top end of the market conditions are remarkably positive. The volume of properties let above 2,000 per week is up by 40% on last year, indicating that there are still a very healthy number of applicants moving to or returning to London willing to pay premium rents.
Similarly, many of the City firms with whom we have links for their graduate relocation programmes have told us their graduate intake has only been fractionally reduced this year, despite press reports. We have already housed a large number of new hires from the big four in professional services, as well as top law firms whose graduates
return to us every year. Smart landlords now increasingly realise that young professional and graduate sharers make excellent tenants in such a competitive market particularly as their busy work schedules usually mean low wear and tear on the property.
The Autumn market ahead looks unquestionably positive. September traditionally sees a peak in the number of prospective tenants registering to look for property, with levels in October and November remaining buoyant. This should assist in slowly balancing out the oversupply of property as competition between tenants builds. As such, we predict that prices will gradually begin to strengthen at every level.
Marsh & Parsons: How we add value
Marsh & Parsons has been operating in your area for over 150 years and our accumulated knowledge and enthusiasm for our local market is unrivalled. Established, innovative marketing techniques and our approachable reputation attracts a higher number of quality buyers. You will be kept up to date with weekly feedback and regular market reports so that your decisions are informed. In a changing market you need facts not flattery!
Wide exposure makes the difference. Our marketing features our clients properties in a number of local, London-wide and national publications including Conde Nast (Vogue, GQ etc) The Sunday Times, The Evening Standard, The London Magazine, The Grove, The Hill and many others. In addition to featuring on our brand new website we also make full use of all the principal property search portals including Primelocation, Property Finder and Globrix. Marsh & Parsons clients benefit from the largest team of highly experienced negotiators in the area. They are of the highest calibre and this pays real dividends. Their experience, coupled with our local multiple office infra-structure, local know how and standards of service, enable us to develop relationships with buyers and tenants that ensure exceptional results for our clients.
Marsh & Parsons: Notice Board
By Paul Price, Brook Green Sales Manager
For what seems like an eternity, the gigantic Westfield London building site that has been an eye sore and the cause of much debate and congestion is finally nearing completion and at last we can see with our own eyes what all the fuss is about.
Shepherds Bush Station now has to be the best looking tube/rail station in London and the sheer scale of the 21st century mega structure dedicated for the sole pleasure of shopping and eating will, without doubt, draw people to our area in huge numbers.
The question for us living and working in the immediate area is of course, what effect will it have on us? In seeing the end result, I can only say it has to be a huge positive.
Not only is this wonder of modern architecture comparable with some of the worlds most imprsssive (I believe the atrium is the size of a footbal pitch), it will create 7,000 new jobs for residents in the area and I understand a further 1billion of investments monies will be injected into the surrounding area over the next 10 years.
What immediate impact this will have on property prices is difficult to say in the current climate but long term, an area's prosperity is governed by it's local amenities and desirability.
On top of transport links which are ideal for anyone looking for a quick commute into central London or the international traveller needing easy access to Heathrow & Gatwick airports, Brook Green, Brackenbury Village and the surrounding enclaves offer residents some of the best schoolingm dining and social establishments in west London.
Add to this Europe's largest, most exclusive inner-city shopping centra and I could be excused for my biased optimism!!!