In our latest post, 4 top Buying Agents (Jeremy McGivern of Mercury Home Search, Henry Sherwood of The Buying Agents, Fraser Dyer of Landmass and Hend Maktari of Black Brick) offer their take on the market for Luxury Property in London.
A Market Update
Over the past three years, safe haven demand from those concerned about rising economic and geo-political risks continued to underpin London property prices, while the gap in house prices between Central London’s boroughs and the rest of the UK widened sharply. London’s enduring attraction as a trophy asset and international business centre was also an important factor behind resilient overseas interest. With the Eurozone lurching from one crisis to the next, political and economic uncertainty around the globe appears unlikely to dissipate any time soon.
However other factors may cause London’s high-end housing market to slow down as the impact of the government’s tough stamp duty measures begin to set in and the sterling appreciates against the Euro (+12% from July 2011); others believe that the price boom that we have experienced in the last 5 years is simply not sustainable in the long term and the luxury property market will eventually settle on a more sustainable growth level.
Looking Ahead
Jeremy: The frenzy to buy property in prime central London that we saw at the start of the year has dissipated. This is not to say that good properties are not selling at high prices. However, in the first three months of the year the buying was indiscriminate, but buyers are now more circumspect and discerning, so properties that are average or simply overpriced are sticking on the market. It is likely that the rest of the year will continue to see a drop in the number of transactions and little price movement as the expectations of buyers and sellers may widen.
Henry: Nonetheless transaction levels and prices are still at a healthy level and the rise in growth values is now at a more sustainable level. Predicted overall growth for 2012 in PCL is around 4%, compared with 14.1% in 2011, but prices are still a healthy 13% above the previous peak of March 2008. Opinions vary as to whether it is a direct result of the shortage of stock in general due to the various factors or if it is a sign of things to come due the economic downturn and Eurozone turmoil. However the general consensus is the uncertainty regarding future tax implications of £2M+ has not helped and figures prove the number of sales between £2-10M is down by 23%.
Hend: We believe international buyers looking to protect their wealth will continue to hone in on London’s unique attractions. A good example was the recent sharp increase in enquiries from wealthy French buyers looking to escape both the prospect of a euro break-up and the grim reality of sharply higher taxes under new president Francois Hollande.
How have this year’s changes in tax impacted London’s Luxury Property Market?
Hend: For all the media column inches dedicated to the higher tax changes impacting high end property in London – and particularly those affecting purchases by wealthy foreigners in tax ‘envelopes’ – there is scant evidence yet these charges are having any impact on the broad strength of demand for homes in the UK capital. It is still too early to tell what impact proposed Mansion Tax and new capital gains regime may have.
Fraser: We are only beginning to witness the true impact of the stamp duty tax increases imposed in George Osbourne’s Autumn Statement; and despite the significance of these less appealing circumstances, investment in Central London seems to be holding up well.
In brief can you please share with our readers one of your favourite suggestions or investment strategies in this market?
Jeremy: The key in this market is to remain patient and selective: focus on the best properties in the prime areas and do your due diligence, i.e. ensure that you are seeing all the properties that are available through the agents and also “off-market” properties. Ensure that you have a clear idea of values and do not be fooled by the vendor or estate agent using just one or two comparable properties to justify their price.
Hend: Values can fluctuate significantly from one area to the next, from one floor to another, or from one side of the street to the other, so it’s vital that buyers take advice before buying and use a reputable and well established buying agent to assist in the process. We look for deals where we can see clear evidence of strong yield and potential for long term capital appreciation.
Fraser: We have recently advised a number of long-term focused investors to look beyond the super prime areas and invest in higher-yielding property a little further out. This advice is based on the widely held view that the prime markets are plateauing slightly and we believe that it is vital that our investors consider other areas that are likely to experience more prolonged value increases such as Brook Green, Ladbroke grove, Paddington and Camden.
Henry: With potentially hundreds of properties you need to know your prices (sqft), yields and growth drivers so you can act quickly on the right property. Alternatively, just trust your buying agent….. that’s what you pay them for!
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