July Newsletter
Like many other countries around the world, the summer period in London tends to be the quietest of the year. Fewer properties come on the market and fewer house hunters are on the move as people are focused on planning/going on holidays.
£5M +
One segment of the market that doesn’t seem to be taking a break to enjoy the sun is the £5 million plus market. According to the Financial Times, “sales in the first half of the year almost matched the 208 £5mn-plus sales in the whole of 2019”. In the first 6 months of the year, there were 294 sales of homes worth £5mn or more. This segment of the market is proving to be strong despite the somewhat uncertain economic conditions as it is less dependent on borrowing and not as negatively affected by the increased cost of living. Both sellers and buyers are willing to transact at this price level, albeit for different reasons. Sellers are showing an increased willingness to negotiate on price due to the potential uncertainty of the economy in the future, while buyers are banking that property will be a more stable investment compared to bonds or equities.
Lack of foreign buyers/drop in pound valuation - time to buy?
According to research from Savills, the London market has continued to recover over the last 3 months however there are a lack of foreign buyers in comparison to before the pandemic. This is especially the case with buyers from Hong Kong, who have refrained from visiting the capital because of tough restrictions when they return home – a quarantine period for minimum 2 weeks. Russia is another case – albeit for very different reasons.
Although we are seeing a recovery, the market is still over 17% down from its peak in 2014. Moreover, the devaluation of the pound since then also means that now could be a very attractive time for a foreign buyer to purchase a home in London. While no one has a crystal ball, the market predictions for the prime market are very strong – Knight Frank are predicting values to rise by almost 23% over the next 5 years.
How will the recent heatwave affect the London property market?
This is a subject that I place a lot of emphasis on when working with my clients. London has just experienced its hottest day on record – 40 degrees. There’s no sign of summers getting cooler – in fact, summers are getting hotter every year. By 2050, it is expected that London will be as hot as Barcelona due to global warming. Unfortunately, the city is not equipped to deal with such heat – buildings were designed to keep heat in.
Very few homes have AC, it is mostly found in prime developments and houses. According to a study, only 5% of homes in the UK have it. Historic buildings and planning permission make it difficult to retrofit AC in existing homes. The challenge is that this leaves very few homes with AC to pick from. It is inevitable that this will influence the London property market.
In my opinion, buying a home with AC or that has the potential to install AC is essential for the long term – both as an investment and for comfortability. I truly believe that in the years to come AC will not be a luxury, but a necessity when it comes to buying a property in London. It does limit the number of choices when it comes to buying, but it is a worthwhile sacrifice.
Energy Performance Chart (EPC) changes
Every property that is for sale or rent in the UK must have an EPC done – a chart that shows how energy efficient the home is. There are now new proposed government requirements for energy efficiency in rented housing that could have a significant impact on landlords and eventually all property owners. According to an article in the FT, “the energy efficiency of a home is ranked using a system of energy performance certificates (EPCs) that run from “A”, the most efficient, to “G”, the least. As part of its efforts to reduce UK emissions, the government wants all homes in England and Wales to reach a minimum of level “C” by 2035. In England, 42 per cent of assessed homes currently reach C or above”.
The timeline for landlords is tighter – the proposals are requiring landlords to make sure their homes for rent reach level C or higher for all tenancies that are new or renewed by 2025. For all existing tenancies, rental homes much reach level C by 2028. It is possible to retrofit homes to improve their energy efficiency (double glazing, insulation, etc), however this could eat into the profits and can be quite challenging. This is I am advising all my clients to only consider homes with an EPC rating of C and above (or D with the potential for C). These homes tend to be in new buildings which also benefit from AC – another way of helping future proof an investment.
Property of the month
Every newsletter will highlight a property of the month. As a property buying consultant I spend countless of hours looking at property, from time to time I come across properties that tick most (if not all) the boxes. For the first property of the moment, I have chosen this fantastic property for sale with Russel Simpson on Draycott Place in Chelsea.
The flat is in a brilliant location – very close to Sloane Square, Sloane Street and the King’s Road. It’s only a few minutes’ walk to the very popular Pavilion Road, which is arguably one of London’s nicest high streets with fantastic cafes and restaurants. The building comes with a lift and a live-in porter.
The flat itself was totally redone a few years ago and was interior designed by a renowned designer. There are three bedrooms and three bathrooms – all of which are a good size. What is unique about this flat is that it in addition to having a beautiful living area, it has a fantastic kitchen on a separate floor with a dining area. The kitchen is very bright and has a small terrace. It even benefits from air conditioning – which as mentioned, I highly recommend these days! There should be the potential for AC in the rest of the home seeing as the outdoor unit is already placed (which is usually the difficult part).
If you would like to know more about this apartment, please contact me for more information.