REAL ESTATE BLOG BY PROPERTY PROFESSIONALS

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.

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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.

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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.

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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.

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Activity has certainly slowed down in prime central London over the last 3 months.
Buyers are cautious and finance is expensive.
One of the largest London agents was quoted as saying: "I could get the best house on the market and will struggle to get 2 viewings in a week."
Its the waiting game; buyers have suffered through the last frenzy and, now , not only will they not pay top money they feel that waiting will only work in their favour. Its fair to say that asking prices are 10% down, the question is will they go down another 10% by autumn?
This is not to say that deals are not happening, they are. Fewer but the values are larger.
Recent press article reported that an owner of a Kensington Palace Gardens property refused £170m. Another prime and uniue property of 4000 sq feet came on the market in Knightsbridge for £25m, a sale was agreed at asking price and the buyer was gazumped when another purchaser offered a same day exchange paying in the region of £3m in excess of the asking price. This is all in a softening market place!
There is also talk of the non domociles moving away from the UK over the next 18 to 24 months , this should result in more prime properties coming on the market and with the increase supply privces will have to be competative.
The point is if you are a seller the chances are you have done well. Specially if you bought your property more than 2 years ago. There may not be 40-50% gains to be had but the gains are still enough to make a seller happy and keep London property investment a viable proposition.
The question is how long will the blues last? Will all purchasers get tired of playing the waiting game at the same time and cause another buying frenzy in Autumn? Will the summer bring oil rich buyers back into town keeping the prices up? Or will we all be suprised by increased investment by the newly rich coming from an emerging market on another continet?
What keeps us all interested in this facinating market place is that things can change so fast that no one can predict what will happen in 6 months time.
Newspapers all say its doom and gloom and prices are dropping and will continue to drop, judging by history and how wrong press reports have been about prime London property, one cant believe what one reads!

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The first quarter of 2008 has seen the much talked about slow down in the London Property Market.

There is an obvious loss of confidence amongst buyers, and finally , sellers and their agents too.

This lack of confidence will result in better pricing and even a drop in the lower priced properties. In the case of prime London Property lower priced means below £5m!

Any price dips, however, must be put in perspective. New pricing should be looked at as more of a correction rather than a drop. 2007 saw an average of 30% increase in prices of prime London Property.

This unrealistic price increase will easily cover any perceived losses that the next 24 months may bring. The end result will be that London property is still a good investment.

Many buyers are holding back to see what will happen over the next six months. The highly qualified buyers, however, those who have spent many months even years chasing after prime property, are still actively looking and are willing to make the financial commitment.

Needless to say any one who is in negotiations to buy a property right now is driving a hard bargain. No one is willing to pay the inflated prices we saw in 2007.

Buyers are exercising extreme caution which is mainly driven by the fact that borrowing is harder and more expensive.

We hope to see more prime properties come onto the sales market as absentee non domicile residents put their London bases up for sale. This follows the exaggerated hype in the press about the effects of the change in non domicile tax status.

Those non domiciles actually resident and based in the UK are electing to pay the £30,000 and make no changes to their property ownership or living arrangements.

Also for consideration is the impact the new non domicile tax will have on employers hiring in London.

The property rental market is driven by the expatriates and their City jobs. Once the Easter school holidays are behind us and the traditional high season starts for big corporate moves we should have a clearer picture of the state of the rental market.

Traditionally as activity in the sales market slows down the demand for housing turns to renting. There is every reason that rentals will continue to be strong and rising since much of the available stock was sold by investors taking advantage of the 2007 property boom.

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If you are having dinner with any young couples with small families then "prices are coming down" is a must have topic of conversation at all dinner parties.

For those of us who work in the industry we have heard it for 15 years.

Bankers will tell you "Its really happening this time!".

If you consider that property prices increased up to 40% in the last 8-9 months then a 10% reduction in asking prices is not exactly an indication that prices are going to come tumbling down.

Another way of looking at it is that prices went up by 30% in the last year!

If you talk to any central London agents right now they will tell you that they have stacks of very well qualified buyers all waiting to buy quality homes that they cannot find.

I recently got engaged and joined that list.Over the last 4 months of house hunting I can confirm there is little out there any anything worth while is snapped up.

The properties that are being reduced in price are those that do not tick the majority of the required boxes. They mostly belong to sellers who saw an opportunity to sell their difficult properties in a hot market.

My father always told me if you are buying a home and not an investment do not waste time analysing the market, find what you like and if you can afford it get it. One saying I heard was "you never pay too much just too early when it comes to prime London property."

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Throughout the month of August the news that the financial markets were in a crisis was the subject of discussion amongst many property professionals and their clients from various holiday destinations around the world.

Selling agents were confident that the sub prime crisis that started in the US would have no effect on prime London property and buying agents were quietly hoping that the news will make it easier to acquire properties on behalf of their clients during the last quarter.

Generally, all agreed, that by mid September when everyone is back from their holidays and children have gone to school it will be the time to tell where the property market is heading.

Traditionally prime property prices go flat when the market cools down and not down. The last 6-9 months, however, have been exceptional times. We have seen between 40-60% price increases in some areas and with certain types of property.

This means that there has to be a correction. Under normal circumstances the increases that happened in the last 3 quarters would have taken at least 2 years to be achieved so a reduction is a mater of opinion more like a correction.

As city buyers loose confidence and talks of low bonus are going around, bankers will hold off making purchases with big price tags. They are a substantial source of demand for prime property.

Sellers cannot continue to ask inflated asking prices and have to either hold off or ask more realistic prices, this doesnt mean taking a loss but less of a profit.

The good news is that buying will be an easier task, the anxiety and race associated with buying is so last season! Foreign buyers and Web 2.0 millionaires can now shop in peace.

Next quarter we should see some fair deals as a result of over stretched property dealers and developers.

If however interest rates go into double figures over the next 12 months, then we will see a whole different scene, one that was certainly before my time!

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Just as you think the London property market can not shock you, it does!

The last 9 months have been an extraordinary period for prime London real estate. Some properties have increased by as much as 60% in value.

Properties refurbished by developers are achieving record prices. Buyers are paying huge premiums to avoid the pit falls of refurbishing and the privilege of living in designer homes.

Increasingly, demand comes from buyers with nothing to sell. These are either foreign or affluent couples deciding to live together and keeping their own homes as investments.

A buyer, in prime London, will have had a fair share of disappointments by now. Competition is fierce and sellers can’t even commit to an asking price most things are in the region of……or in excess of and so on.

A growing number of educated buyers have realized that the best way to find your dream home and not make an expensive mistake is to employ a professional to represent you and advise you.

Sellers also prefer buyers who are being professionally represented, it shows commitment.

One agent said about September 07 " prepare for a money war!" the talk is that hedge funds have paid a lot of money out this year so hefty bonuses are on the horizon.

So long as London remains a vibrant and multi-cultural city with a financial centre,real estate will remain strong.

Prime London property is always on the shopping list of the rich and powerful.

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There is a shortage of properties in the rental market, owners tempted by strong prices have sold their investments. This is especially true at the very top end of the market.

Only six months ago agents were talking about sales prices starting at £1000 per square foot, now agents say “asking in the region of £2000 per square foot” and with such acceptance!

The sales market will slow down, however it may be temporary. Once children are back in school the buyers will be back and soon to follow the city bonus will have an impact.

The strong sales market has resulted in a shortage of supply; landlords of properties in excess of £3000 per week are holding out for their asking prices and in many cases getting them. Usually with a number of parties interested.

These highly fueled sales prices have resulted in the lowest rental yields of recent times. If interest rates keep rising, rents will follow.

As rates go up less people buy and more people rent hence prices will go up.

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Following a number of interest rises by the Bank of England property prices of London's best homes have still not seen a slow down. Six months ago agents were talking about prices starting at £1000 a foot (appx £10,000 a meter) and now London's best properties are pushing towards £2000/ a foot.

The top end of the market is fueled by foreign investment; in excess of 50% of properties over £2 million pounds are sold to foreigners. Mostly this demand comes from people who have nothing to sell resulting in a further shortage of stock hence keeping prices strong. Globally, as emerging economies grow and people become wealthy, many aspire to own property in London's best streets. One agent told me recently that he was house hunting with a Mongolian investor looking to buy a £12m home!

We have yet to see the effect on prices as a result of demand from China, India and Brazil.

Those who own London's best homes can also afford to hold on to them so don't expect to see any bargains any time soon. If demand softens prices will just go flat rather than down in London’s best addresses. Sellers will simply sit tight and wait, they can afford to.

London's mature rental market also provides an attractive option for many unwilling to sell in a weaker market. Traditionally as interest rates rise, rentals get stronger. A recent report conducted by the National Association of Estate agents confirmed that the average time a rental property stays on the market is down this year compared to same time last year.

That’s the word on the street, what the agents are saying.

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Finally; much needed regulations are coming to the property industry and for those of us that have found the old ways frustrating it’s a delight.

On the 6th April 2007 the tenancy deposit scheme was introduced. In simple English this means that all tenant's deposits (for assured short hold tenancies) are to be held in a custodial or insured scheme. Landlords are obligated to ensure that deposits are released within a set time and any disputes are handled by qualified arbitrators. Failure to comply will result in heavy penalties and may also have legal implications on the tenant's obligations.

More information at:

http://www.direct.gov.uk/en/TenancyDeposit/index.htm

1st June 2007 will see the introduction of HIPs, the home information pack. This means that any property that comes to the market after this date must have a home information pack or face a fine.

A HIP must have: details of the title to the property, local and water searches, details of leasehold information and an energy certificate.

It is estimated that close to £350m is lost each year from aborted property transactions. Buyers offers are accepted and then the facts about the details of the transaction are realised, the process takes an average of 6-8 weeks. This results in many transactions being aborted at a huge cost to all parties.

More information at:

http://www.homeinformationpacks.gov.uk/consumer

Still no sign of the government requiring all property agents to be licensed but hopefully that will soon follow! It is madness that people’s largest ever transactions can be handled by an industry that is not required by law to be qualified. The good news is that most reputable agents are self regulated and voluntarily belong to governing bodies like the NAEA (National Association of Estate Agents) and ARLA (Association of residential letting agents).

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What is happening to prime London property prices?

The word on the street is that prices can not go any higher; they have reached a level of ridicule now. That may be the case for the stock we are used to seeing but there is still room for increase for the best of the best.

If you believe that prime London property has quarterly cycles, like we believe, then next quarter will see large number of new properties coming to market.

These properties will be the best there is and prices will be truly unbelievable. Some of the best properties we have seen over the last month have belonged to traditional English families who own exceptional properties in fantastic locations. For many, the long debated move to the country is now in motion.

Elegantly, cashing in and moving out.

Another interest rate rise however will certainly cool the buying frenzy and prices will stabilise. Properties will shift off the sales market and onto the lettings market with people choosing to rent rather than committing to buy.

Any risk taking speculators who bought at the top of the market, hoping to turn for a quick profit, will start to feel the squeeze and be forced to sell cheap or with little or no profit.

The best properties will not be part of this bunch as anyone who paid through the nose to secure the best did so knowing that they will be there for the long term.

Earlier this week we advised an old client, who was bidding on a property through another agent, that the difference between paying £10m or £12m will be irrelevant in 15 years time so buy it if you love it!!

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Welcome to “Street Talk”, written by property professionals based in Kensington, London.

Covering areas such as Kensington, Chelsea, Mayfair, Knightsbridge, Belgravia & Holland Park. The purpose of our blog (Web Log) is to give you a glimpse into what is coming ahead in London's prime property market.

Agents;recognise market trends 3-6 months before the general public accept them.

We hope you enjoy the blog and we would love to hear from you if you have any comments or questions.

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There is every reason that property prices will continue to rise in 2007, agents and the city actually agree!

One large national estate agency firm reported that they expect the market to cool off in the last quarter of 2007.

Difficult to agree that prices may cool off and unbelievable but true that prices will continue to rise!

If we had to bet on it, we would say buy buy buy.....

In the immediate future £4.5 billion of city bonuses are to be spent on prime property, according to an article in the Times. In the longer term, buyers from Indian and China haven't even started buying yet! We would say also watch out for the Brazilians.

Unless new sellers emerge/develop as a result of this boom, prices may start to look like they are in Turkish Lira!

Agents are expecting more property instructions in the first part of the year so hopefully that will have a stabilising effect on the market.

With foreigners buying over 50% of properties in excess of £2m, it may be time for locals to sell at jack pot prices and move to the country!

With access to work so easily available over the Internet we can be anywhere we want!! so they say.......

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According to a Nationwide report released today; "December saw the largest annual rise in house prices for 22 months, with property values 10.5 per cent higher over the year".

No doubt that is a correct statistic but cannot be applied to Prime London Property.

In the last quarter of 2006 most agents that handle prime property will agree that we experienced a 10%-20% increase in property prices just in the last quarter of 2006.

Comparing the UK property market with London's top addresses is misleading an inaccurate.

The same nationwide report says that average house prices are now £173,746, well according to Hometrack the average price of a property in the Royal Borough of Kensington & Chelsea is now £930,000 and £1,300,000 for all prime London property, accourding to Lonres.com.

So maybe if you multiply by at least 5, national statistics apply to prime London Property.

Brought to you by property professionals at http://www.palacegate.com

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