Where are the good deals?
This week I shall attempt to answer a question I get frequently asked by my Arab clients- are there any good property deals left in London?
Around five years ago I was instructed to sell a house in Belgravia for around £55 million. At that time there was a crazy boom going on in the property market whereby the prices kept going up practically on a daily basis and amazingly, were being snapped up. I remember showing this particular house to some very high net worth individuals and who had no qualms about spending huge sums of money on a single dwelling. It seemed then that one could pull a price out of a hat and no matter how outrageous or unreasonable, someone would come along and pay it.
But then came the financial crisis and property collapse. I have already alluded to the re-adjustment that took place subsequently in the property market, in previous articles. Buyers decided to hold off on investing into the property market while they waited for the ‘crash’. It was widely believed that after years of spiralling prices and easy money, that prices would crash and everyone would be left with negative equity. The real cash buyers were waiting in the wings in anticipation. The expected crash never happened and prices stabilised albeit below the previous dizzy heights. Since then prices in Prime Central London have shown small but significant increases year on year and these increases confirm that there is enough demand to keep a crash at bay.
The problem faced currently is a shortage of stock. Both lettings and sales are short of property: whatever comes on the market is snapped up. For example I was recently asked to find a flat in Mayfair for a client at around the £1.5 million mark. A search revealed only a handful of suitable properties of which all went under offer within days of coming on the market. By the time my client had viewed the properties and decided to make an offer, he was asked to go to sealed bids. I would therefore make the point that there are very few, even none, when to comes to ‘good deals’. The distressed sales market which was buoyant post-crisis, has cooled and sellers now have the confidence to hold for a price that suits them, that is, if they decide to sell at all.
Perhaps the only good deals that remain are leasehold properties with short leases which are cheaper and effectively ‘discounted’ given the real price these properties would be worth with a longer lease (and of course even more if they included the freehold outright).. To extend a lease can cost anywhere from £200,000 upwards for Prime Central London. Buyers can be put off by the high cost of renewing a lease. My advice though would be to take the plunge on short lease properties as all the indications point towards continued growth in Prime London property as the year progresses.
A good agent will advise you on the true market value of a property with a long lease and the benefits of buying one with a short lease. To recap the areas that constitute Prime Central London: St. John’s Wood, Notting Hill, Kensington, Marylebone, Mayfair and Chelsea.