Road to recovery for London rentals and sales

The prime London rental market is recovering from the worst dip in recent times. With the sales market going into decline in 2008 the unsold stock flooded the rentals market. Massive over supply had a detrimental effect on asking prices and tenants were negotiating very favourable deals and enjoyed 12 -24 months of relatively cheap rents.

RPI has recovered from being below zero to a healthy 5% now. With the sales market seeing more activity too we find that temporary landlords are exiting the market resulting in a more balanced supply and demand.

Many tenants are accepting large increases in rents, compared to last year, and agreeing to renew.

Confidence is low and caution high in both the sales and rentals market. There are no foolish investments and tenants are also being careful with how much they spend on rents and outgoings.

Although banks have started to lend again one still requires close to a 50% deposit to purchase a property. This puts the investments in the hand of the wealthy with a medium to long term view.

Purchasers are using the opportunity to put together portfolios of prime property to rent and hold, realising appreciation in the longer term since other investment markets are proving to be more unstable and risky.

Prime London property in demand by foreign investors.

Demand for prime London property is still strong , with interest from overseas investors.

Cash buyers from mainland Europe and the Far East are snapping up opportunities with a medium to long term view.

Local developers who secured sites at the peak of the market in 2007 are off loading building sites with planning permissions in place many lack the funding to continue with the projects and finish the build out.

These opportunities require savvy and experienced investors to step in inorder to finish the projects.

Investors need the vision to see how to add value.

Even though demand is strong, the general mood in the market place is one of caution. Banks have started to lend again but they require much larger deposits, with a 50% loan to value being common place.

The rental market is still over supplied but demand for rental properties has been steadily on the rise. This increase in demand is resulting from the inability to raise funds inorder to make the next purchase.

Cash is king.

When it comes to prime London property market, do not believe what you read in the papers.

After a long dark period of no activity the buzz is back in the prime London property market.

Despite news reports that in autumn the real property crash will come. The buzz has continued after the summer recess.

The activity in the prime London property market has been mainly driven by foreign investors. The Euro and the Dollar are both strong against the pound; this together with the lack of confidence amongst sellers makes buying London property an attractive investment.

The lack of property listings is also resulting in some fierce competition amongst buyers but generally when a seller commits to a buyer he stays with the deal.

Many buyers have also been waiting for that big crash. Majority of the people who own property in London’s prime areas can afford to sit and wait for the market to recover and the confidence to return.

What is evident is that properties that are put on the market are correctly priced and sell fast. Qualified buyers that have been waiting for a while to buy are grabbing opportunities and committing to purchase.

Those of us who are professionals working in the property market know that when the media reports negatively activity slows down. We have to sit and wait until confidence resumes.

The media’s global reporting of the credit crunch and a huge impact on activity but not so much on prices. There was certainly a correction from the 2007/08 boom but no major impact on prime property prices and no major bargains to be had.

Banks have also started to lend, albeit 50-60% loan to value but it’s a start.

Spring Fever in London Property Market

After a very quiet and gloomy period there is a buzz back in the market place. Contrary to media reports there were no bargains to be had in London’s prime areas. With interest rates at such low levels most owners can afford to hold and wait and they have.

The rental market however, has seen a pretty sharp decline. Flooded with properties that are not selling, it was reported by one leading property portal that there is 52% more stock on the market compared to this time last year.

As a result , rents are low and even existing tenants are trying to negotiate their rents down in midst tenancy, some for as much as 20%.

It is a good time to buy as competition is weak and it is easier to agree deals and proceed to exchanging contracts without the added stress of being gazumped.

The current activity in the market place is resulting from a few different factors.

It is firstly due to the fact that no new properties have been coming to the market so demand was stacking up waiting for supply.

Traditionally spring has always been the time to sell so we are seeing new instructions coming on daily at double the volumes of last quarter.

The Euro & the Dollar are also very strong against the pound so demand from overseas investors has been on the increase. Some say these conditions are a once in a life time opportunity, weaker prices , low confidence amongst sellers, strong currencies and low interest rates.

Its also a good time to renovate as construction

With so many transactions now happening off market, an increasing number of buyers are seeking representation and using the services of retained buying agents. Buying agent who have access to market intelligence and strong relationships within it can make the difference between finding the right property or losing it.

Prime London Property & the credit crunch 2009

Any properties that are on the open market for sale right now are those of distressed sellers or belong to people who have no intention of selling. The number of new sales properties coming to the market per day is 80% lower than this time last year.



In 2007 & 2008 prices rose by 30% this increase will be corrected in 2009. Any buyers who bought in 2007-2008, during the peak, are set to lose money unless they can afford to hold on to their properties for a long while.



In most prime areas there has already been a 20% correction in prices. This correction is for properties less than £10m.



Spring of 2009 should see a return of transactions. During the last quarter of 2008 most agents agreed that nothing was happening there were no deals to be done.



This was a result of no funding being available and buyers waiting for sellers to drop their prices. Many sellers have chosen to hold on for better times and in the meantime are turning to the rental market. Owners with tracker mortgages are also experiencing improved cash flows since interest rates are so low.



Depressed market conditions, strong Euro and Dollar are contributing towards an increase in demand from cash buyers and particularly investors looking to buy blocks of flats and distressed sales. However it is still hard to secure properties in super prime areas at a bargain price.



It is possible that the property market’s reaction to the financial crises is starting to settle. The dramatic decreases in prices have slowed down and rental activity has picked up.



It is predicted that unemployment may reach 18% , in this case this will result in properties belonging to city workers being the hardest hit. This being the case the price range likely to be most affected in 2009 will be £1-£2m (entry level for prime London property).



Once funding is more readily available an increase in activity should follow and if demand gets stronger it may be that we will not reach the 30% decrease in London’s prime areas but halt in the low to mid 20%’s.

Kensington & Chelsea property market does not follow the same rules as the rest of London let alone the rest of the UK

The average price of London property according to data obtained from the Land Registry and other governing bodies for August 2008, is £370,394 yet in Kensington & Chelsea the average price is £1,155,203.

Analysis from http://www.wheresmyproperty.com shows that in Kensington & Chelsea prices rose by 4.2% over the last month but London prices for the same period were down -2.8%.

Frustratingly the news is always about the big picture and never based on local areas within it. This results in confusing and often inaccurate speculation leading to long periods of deadening inactivity.

There is no doubt that the global economy is having a huge impact on the ability of prospective buyers but the dire news and tumbling financial markets are not having the same effect on prospective sellers in these areas.

In the areas of Kensington & Chelsea and Westminster we face very unique land ownership scenarios.

Between the Duke of Westminster, the Earl of Cadogan and the Crown Estate hundreds of acres of London’s most prime locations are secure and one could say, recession proof.

Digging further one will soon realise that the ruling families of the Gulf states also hold substantial property portfolios in these same prime locations. The Al Nahyans of Abu Dhabi, Maktoums of Dubai and Al Thanis of Qatar.

Trickling down the wealth tree are hundreds of other high net worth property owners in Westminster, Kensington & Chelsea who can comfortably afford to hold and wait. It seems unfeasible to hold your breath wait for crashing prices and desperate sellers.

In the profession it is widely agreed that there will be a 20-25% correction in asking prices over the next year. This still leaves owners in profit if they have had their properties longer than 2 years.

The overstretched developers, speculators and those who panic-purchased over the last boom period are likely to get hit and there will be some attractive deals to be done but only for the lucky few. Many buyers have no confidence or any access to funding due to the current banking crisis.

It is inevitable that the current status quo will continue into the new year; very low activity, a huge oversupply of properties for rent and some seriously troubled Estate Agents.

It’s a great time for investors with deep pockets to bulk buy and hold for medium to long term.

Prime London property sales and rentals update summer 2008

Most selling agents are loath to admit that prices are coming down. Many will tell you; the market is flat; there is very little activity; lower asking prices and a host of other carefully chosen words but it is generally agreed that asking prices are down by 15% and are likely to go down a further 5% over the next 12 months.

As we have mentioned before another way of looking at this is that prices only went up 20% last year rather than the 30-40% increase that many prime London locations experienced.

The selling price reductions are at the lower end of the prime London market which is below £5m the rest is flat and the over £10m market, has not been affected.

There are certainly less buyers but there is still demand from highly qualified buyers. These buyers have a good knowledge of the market and know when a special property comes their way they have to pay what it takes to secure it.

In most cases these buyers are acquiring homes that they will hold on to for many years so even if they end up over paying in 10 or 15 years time it will not matter. It is very possible that the top end of the market will still see a slight increase over the next 12 months. Demand is less frantic but prices are holding out.

Sellers are cautious not to be overly confident and as such are willing to agree deals at slightly less favourable conditions. They know that a bird in hand is better than two in the bush.

Growing numbers of property investors and developers are choosing to hold on to their properties and rent whilst riding out the weak market conditions.

This has resulted in better quality properties coming onto the rental market demanding strong rents.

Tenants have become demanding and only want the newest and the best properties. Many traditional and older rental properties are not shifting and in some cases not even at huge discounts.

Traditionally this time of year is always quiet but once the kids are back at school and everyone is back at work we think that mid September will be a telling time