Tales from the Front Line

Prime London Update

by Roarie Scarisbrick
on June 30, 2010 in London Property

The summer of 2007 is generally viewed as the peak of the UK property market, but the reality is that the very top end of London's prime markets appeared to be invincible for another year, and thrived throughout 2008, until Lehman finally burst that bubble. 

The post-Lehman fallout was dramatic, and the market stopped dead in its tracks. We were negotiating on an exceptional house at the time and backed-off when the news broke. When we returned to the negotiating table three weeks later, we were talking about figures almost 50% less than previously. Indeed, it is fair to say that in the six months following Lehman, the very top end of the market was hit worse in percentage terms than the wider market, although there were too few transactions to crystallise the fall.

There were less than a handful of transactions in the first half of 2009, and even heavily discounted asking prices (sometimes to 30% - 40% from peak levels) could not revive the market in the first half of the year. However, the market did gain momentum towards the summer, due to growing confidence and continually contracting supply of stock, pushing values up by 20% (again based on very few transactions). 

The real activity in the market has been from January of this year. There have been between 15 and 20 house transactions in London so far this year at over £20m, against less than five in Jan - June 2009. A significant portion of the activity has been in North London, which accounts for around half of this year's biggest transactions.

Some of the big sales have been well publicised, including the large house on Eaton Square, which sold to Chinese investors at just over £30m, as well as the Royal College of GPs on Princes Gate which sold, again to Chinese investors, for £34m. In North London, a 12,000 sq ft house in NW3 has sold recently to a Russian family for over £40m. Indeed, the demographics of buyers are broader than ever, with Russians, Chinese, Middle Eastern, Scandinavian and even old-fashioned English buyers battling it out for the precious few houses available and sending values in excess of peak levels once again.

London

by Roarie Scarisbrick
on February 17, 2010 in London Property

OK. So we established that the London market isn’t bullet proof. A 40% landslide for prime markets in the months after Lehman proved that beyond doubt.

But this bounce has taken everyone by surprise. You would have laughed me out of K&C had I told you this time last year that properties would be trading at and over peak levels by now. But here we are again.

We have always said that you should base your view of the London property market on whether you see it becoming more or less of an international city. This is the food which feeds it. Our biggest fears in the last bull markets were threefold: 1. any changes to the domicility rules. 2. significant changes to the tax regime and 3. global economic meltdown. Ticks in all three boxes… but she hardly faltered.

Nobody can deny that our economic recovery feels somewhat fragile, and even the biggest of the bulls charge cautiously. Our market faces all sorts of threats in the coming months and years; currency arbitrage, apparently arbitrary tax threats and the elephant in the room which is inflation and the inevitable hike in interest rates.

But Central London is a very small place and it can’t grow, in spite of the high hopes of the peripheral developers. It will continue to thrive for as long as it holds allure for international investment. Indeed, a learned banking client of mine is looking to cash-in on promising emerging markets by ignoring risky individual investments, and investing in London property, where many of the gotten gains will end up.

HIPs

by Roarie Scarisbrick
on April 28, 2009 in Properties

How could legislation so well intentioned have become such a cumbersome, expensive and counter-productive debacle?

Home Information Packs finally landed on April 6th 2009. Following a stuttering start, it is now a legal requirement to have a HIP in place before any marketing of a property can take place.

The problem is that nobody appears to want them. They were supposed to speed up the process by providing more information up front but in fact they have slowed the system down and taken much of the agility out of the property market, at the worst possible moment.

Take a close look at a HIP (surprise your lawyer or agent by asking – nobody else has!) and you will find sketchy and simplistic information, much of which is open to interpretation, including a questionnaire where disingenuous sellers are given a licence in the form of a “don’t know” box. And don’t even get me started on the Energy Performance Certificate?

The English systems are a little archaic in places but is there not a better solution? Ideas on a postcard please?