On the Market - Kensington, Chelsea & Pimlico, Spring 2012
Fri 20 Jul 2012
With a shortage of property and huge demand from both domestic and international buyers, will prices continue to rise throughout the rest of 2012?
by Liza-Jane Kelly
The market is particularly strong in Kensington and Chelsea with values soaring due to a shortage of property coming onto the market. This, combined with huge demand from both domestic and international buyers, has lead to heightened competition often resulting in sealed bids. Price rises for quality homes in the best locations have been astronomical so far in 2012, and when people discover the right property, they know they have to move very quickly. Just this week, a property in Kensington attracted more than 100 viewings and sold for more than 30% over the asking price via sealed bids. There is currently a real mis-match between supply and demand with our Kensington, Chelsea and Pimlico offices having an average of 23.5 buyers registered for every property - ranging from 15.5 in Chelsea, to as many as 34.7 in Pimlico.
Both Kensington and Chelsea have always been popular with foreign buyers who have relocated to London or want an investment property. However, determined cash buyers from a huge number of countries have been out in force so far this year. We find that a number of purchasers from the Middle East, for example, spend about half their time here and want a property that reflects their lifestyle. Other international buyers from an array of places, such as Italy, Egypt, Greece and the Far East, have all influenced buying patterns.
Pimlico is somewhat different to the very established Kensington and Chelsea. It represents great value and is more accessible than many realise. You can easily walk to Sloane Square, Belgravia and Mayfair and proximity to Victoria helps those travelling internationally. Pimlico's increased popularity is now more evident with less property on the market as many domestic and international homeowners are reluctant to part with their pied-a-terres in an area that's becoming increasingly more gentrified. Despite price rises already this year, you can still purchase homes at substantially less than our near neighbours.
I envisage the patterns and trends of 2011 repeating themselves in Kensington, Chelsea and Pimlico this year, unless of course something unexpected happens in the financial markets. And even if there are a few more wobbles along the way, the lettings market remains extremely strong and history shows that these areas are likely to hold up and remain strong in the long-term.
Weve had a very good start to the year here in Chelsea, with continued strong demand from overseas buyers vying for the limited number of properties for sale. This has resulted in very strong prices being achieved, even though transaction numbers continue to be around half the 15 year average.
by William Hughes-Ward
Old Chelsea, an area once considered to be the domain of a very English kind of clientele has seen a huge increase in the number of foreign buyers looking for a safe haven for their money. The more sophisticated overseas buyer recognises this area as another prime neighbourhood to live in alongside the traditional locations of Belgravia, Knightsbridge and Mayfair. For instance, we have very recently sold a stunning four bedroom house to a young Russian gentleman who insisted he would not live alongside his fellow countrymen in and around the likes of Eaton Square. Of course, we have continued to see exceptionally strong demand from both the Italians and Greeks right throughout the current Eurozone crisis, again seeing London as a safe place to invest and a great place to live.
A number of new overseas buyers are coming to the market with the expectation of picking up a deal given the global economic climate. They are fast learning that anything of any quality is being snapped up without delay. We were marketing a large upper maisonette in Tedworth Square back in 2009 and had very little interest at the time. We re-launched the property earlier this year with a 15% increase in price and generated multiple bids. We sold the property for 250,000 over the asking price with four out of six bids coming from eurozone buyers.
This demonstrates that there is significant growth in the market and if supply remains slim and interest rates remain low, eager buyers will keep knocking on our door. Inevitably, this will lead to further price growth in the 'super resilient' prime Chelsea market of around 3-5% this year.
The stamp duty hike represents a financial kick in the teeth for prime buyers, but it shouldnt derail the market.
The prime market has absorbed stamp duty increases in the past, and given the current level of buyer demand, it will weather the storm in the long-term. While the added cost may affect some buying budgets, most buyers looking to purchase property for over 2m are unlikely to put their lives on hold and abandon their house-hunting altogether despite facing an additional cost of at least 40,000. However, in practical terms, it's likely to create price bunching around the 2m threshold and demand for homes just shy of 2m will be even stronger. At a time when the government should be doing all it can to encourage the property market, adding financial obstacles to the only part of it that is flourishing is a questionable move to say the least. The affects of the tax hike remain to be seen over the next few months and needless to say, we will be monitoring what affect, if any, it has on the higher end of the market.
Patrick Littlemore talks about the Chelsea, Kensington & Pimlico property markets and provides his advice to landlords and tenants in the current market.
At the start of the year, a shortage of available property pushed rental prices upwards. This increase has stabilised in recent months as more property is slowly coming back onto the market, however, there is continued high demand amongst tenants, so I expect these rises to continue once the traditional lettings summer market is in full swing.
One of the reasons for a recent shortage of property is that people are staying in their properties and renewing contracts. Over the last year, 90% of tenants (in properties professionally managed by Marsh & Parsons) renewed their contracts with us, as did 75% of tenants in properties which were not professionally managed. Tenancies are also being signed for longer usually in excess of 12 months and very often without a break in the contract, with tenants opting instead for a lengthier 18-24 month term. Since the beginning of the year we have witnessed up to 30% less property on the market as a result, we suspect, of these renewed tenancies and longer contracts. There has also been an increase in the number of tenants looking for property, in part as a result of indecisive buyers who are nervous about actually committing to a purchase in the current economic conditions, but also due to buyers who are unable to find something suitable, given the shortage of available property for sale. Both these would-be buyers are now, instead, renting.
On the bright side, the investor landlord and 'accidental' landlord have made a come-back this year. This is particularly prevalent in areas such as Pimlico, where new build developments such as 'St Georges Wharf' are attracting buy-to-let investors. Equally, were discovering that a number of sellers are testing out the sales market, and if they can't sell for the price they want, theyre then letting their homes. They may also put their homes up for rent and sale at the same time. This brings more property onto the market for prospective tenants to look at, which has to be a good thing.
Kensington and Chelsea remain firmly on many renters' radars. They are more established and particularly popular for international, corporate tenants. However, we're noticing that, as much as tenants may initially register with our Chelsea and Kensington offices, they are being tempted across to neighbouring areas such as Pimlico, which offers more value for money. Pimlico and areas such as St James's are emerging as more favourable amongst tenants working for nearby companies or government bodies who increasingly see these areas as more convenient. Indeed, weve recently found rental property for tenants working at the Google offices in Victoria as well as for an MP on Eccleston Square who has signed a three year contract.
There has been a notable resurgence in the buy-to-let market, but not a drastic boom. It's still hard for landlords to borrow, requiring a deposit of at least 20% for a buy-to-let mortgage. A purchase needs to be based on long-term planning, taking into account yield (typically 3-5%) and of course long-term capital appreciation. As lending eases, this sector of the market will inevitably grow and as a result will provide more property to help satisfy the growing demand from tenants.
And finally, my advice to landlords wondering whether to kick out existing tenants for the three-week Olympic period, is to think long-term. Unless you're set up specifically for short-lets, it might not be worthwhile packing up your personal belongings and investing in the necessary safety checks and codes for such a short time. If the scenario of three people chasing after every one home continues, a longer let certainly makes sense.