By Alex Newall, Managing Director, Barnes Private Office
Whilst property prices are higher in 2017 than 10 years ago, liquidity is significantly lower once again and prices have fallen. The property market this time has been directly affected by higher stamp duty and the bottleneck which has been placed on the market around the £1.5m level.
Fuel on the Fire
Fuel has been put on the fire of the mainstream market, causing increased competition and high rates of growth as investors compete with first time and family buyers. This bottleneck is bad for the social mobility of people who want to sell in London and buy outside, which would free up prime housing stock in where family houses are in short supply. People want to move jobs and they cannot. Estate agents’ inventory is at an all-time low.
Super Prime Property
Mezzanine financiers are now being hit, as equity holder developers have been wiped out – this is particularly apparent in the super prime £10m segment for residential property. More and more frequently we are acting for senior debt holder (the bank), rather than the original owner or developer. We are having to work double time for lower returns as finding buyers anywhere near to yesterday’s prices is hard work. Unless we want to see more owners defaulting on loans, something has to give. Add to this Brexit, UK political uncertainty and a dysfunctional government and we are getting close to the perfect storm.
The Savvy Investor
Whilst many research reports cite falls of circa 15% in PCL, we have seen drops by as much as 40% for those who seek immediate liquidity; sadly these cases are becoming slightly common.
However, this is good news for the savvy investor who will go against the flock. We are seeing generational investors return to the markets deal hunting. The landed gentry, who have been priced out by wealthy private clients from The Middle East and Russia, are making a comeback in areas like Chelsea and Belgravia. This is their time to buy at more affordable prices for the long term. Hong Kong buyers with links to the UK through education or family are also investing.
Global Investors and London
There is no surprise that global investors, from anywhere in the world where there is danger or political unrest, still believe London is a safe bet.
How many times have I heard – ‘I’d rather have 10p in the UK, than £1 in a war torn country.’ The UK is still the UK, the rule of law applies and we will come through Brexit. Our philosophy is to just get on with the job in hand. I believe that right now this is a great buying opportunity and so do our clients, who can afford to hold for the medium term. It’s time to cherry pick the best in class assets and go shopping in London’s prime and super prime marketplace.’