“Price is what you pay, value is what you get”

In our latest blog post, top Buying Agent Henry Pryor gives us his take on the current state of the London luxury property market.

Summer madness seems to be gripping the Central London property market or at least much of it. A shortage of new stock and an influx of French and Greek buyers has pushed up vendors expectations to a new, record high. Estate agents WA. Ellis reported average asking prices in Kensington & Chelsea, the “Royal Borough”, are 16% higher than they were a year ago, breaking the psychological £2m for the first time. Records of sales in March just published by HM Land Registry mark sold prices (in my opinion more important than asking prices) a full 12% higher than a year ago and 20% above where they were when the financial world stalled in 2008. The apparent greed being displayed by some sellers can be put down to two things; firstly an appreciation that, despite the Credit Crunch, London is awash with wealthy buyers albeit most still wealthy because of an inbuilt caution and secondly because some estate agents are giving optimistic ‘valuations’ in order to curry favour and gain a sale that ought by rights to be offered at a lower level.

‘Respect’ however for some of the best estate agents who, despite the clamour of doomsayers, are getting some properties away at premium prices. Nº 20 The Boltons completed in March at just under £55m proving that there is still both enthusiasm and willingness for the right property almost despite the price!

As trophy sales such as the apartments in One Hyde Park have proved so well, there are some occasions when one’s idea of value differs from another’s. I must admit to being slow off the mark when it came to appreciating that for a select few buyers the price was literally immaterial. My Jaeger LeCoultre watch tells the time as well as my beach Swatch, but I happily forked out considerably more for something that does so much more than confirm how late I’m running. The adage “Price is what you pay, value is what you get” applies to most goods but in the case of beautiful jewellery, certain property and a very few fast cars the former usually ends up being larger than the latter.

The past year will, I suspect, provide a showcase of poor investment decisions in the months and years to come. “When the tide goes out you get to see who’s been swimming naked” is the oft-repeated investment line attributed to Warren Buffet. Prices across the UK have been falling with the exception of the Capital but many parts of London have fared less favourably to Chelsea. Rents have peaked or at least are pausing for breath despite some record deals being done in Mayfair and around the Regents Park in recent weeks. As rents falter so do yields and those who view property as an investment have only been able to justify paying the high prices of recent months assuming that those values will continue to climb.

At a time when asking prices have never been higher and when the Government is heaping more tax on those owning the most expensive properties there is, naturally, a healthy debate about the wisdom of buying a luxury property. However, in my opinion there are still opportunities for those canny investors who take a practical approach and don’t let their heart rule their head. If they are able to exploit vendor’s circumstances and are not scared about negotiating the purchase price (about a third of all homes on the market have had to reduce their asking price), a handful of them may be laying down the foundations of their future property fortunes.

Henry Pryor has written for numerous websites, newspapers and magazines including BBC Online, MoneyWeek, The Sunday Times and The London Magazine. He has also been a member of the judging panels for the The 2012 LSL Property Press Awards and the Times/Sunday Times Letting Agency of the Year 2012.