The English capital is a city of neighbourhoods, and rents and sale prices vary a lot, depending on location, writes MARK HENNESSY, London Editor
FOR THE newly-arrived in London, concerned with either buying, or renting a home, the first thing to understand is that there is rarely any such thing as “the London property market”. Each borough has its own particular economic micro-climate.
Some, such as the top-end of Belgravia, Mayfair, and the like, are dependent upon bankers’ bonuses, and affected by a permanent shortage of the type of properties wanted by the millionaire, or, and these are far from unusual, the billionaire class.
Besides being influenced by the general economy, property values elsewhere are affected by the number of good schools on offer and transport links; and whether there are significant numbers of newly-built properties left unsold.
And plenty are unsold, to judge by the offers that can be seen in many estate agents’ windows on the high streets, offering all manner of attractively-engineered packages to entice possible buyers.
Despite an economy in recession and a banking system in crisis, prices in London are rising; though nearly everyone has an opinion on by how much, and by how fast. And they differ wildly.
Prices,e.g., can range from £335,000 (€374,000) for a two-bedroom garden flat in Clapham, SW4 to £799,000 (€892,105) for a one-bedroom flat in Chelsea, SW3 to £1,495,000 (€1.66m) for a three-bedroom House in Kensington, W8.
The Daily Telegraph, which carried an "Oh, my God, I have been priced out of the market" piece this week, told its readers that prices in Fulham and Wandsworth "are up by at least 12 per cent since the beginning of the year".
However, the Land Registry, in its latest figures, reports that the average price of a property in Hammersmith and Fulham is 7.2 per cent down on where it was last year, while Wandsworth is 6.6 per cent below.
The Land Registry says house prices across London rose by 1.3 per cent in September: the fifth month in a row when they did so, though prices are still 3.2 per cent below where they were a year ago.
The headline figure masks a multitude of varying performances: prices in Islington, always popular with the more adventurous, are 6.9 per cent down on a year ago, but up 1.2 per cent in September. Westminster is 1.3 per cent up on the month, and only 0.4 per cent behind where they were there this time last year, while Lambeth – a popular destination for the Irish – is still 8.6 per cent down on the year, though 1.2 per cent up on the month. Traditionally, Land Registry statistics tend to lag behind the situation on the ground, and others are more optimistic. The Nationwide building society found that London prices had jumped 0.9 per cent in September – the fifth rise in a row, according to its figures, and it declared that prices in the capital are now back to where they were a year ago.
While people may argue about price trends, the one point on which most estate agents agree is that there is very little on the market, and that all pricings are, accordingly, fickle guides.
Lucian Cook, a director of Savills Research, said: “There is a lack of stock. The only people selling were those dealing with death or divorce. They are a respectable part of the market, but the discretionary market retreated like crabs under a rock. Transaction levels fell by 50 per cent during the downturn.”
Cash-rich buyers, attracted by the drop in prices and – for international investors – the fall in sterling’s value came back in in September and October: “They are not constrained by 75 per cent loan-to-value ratios,” he told The Irish Times.
Liza-Jane Kelly of Marsh and Parsons, which is owned by Sherry FitzGerald, agrees: “Last year, everyone sat on their hands and did not act. We saw the market pick up in the last quarter in central London – in Battersea, Fulham, Clapham and Balham.” The reason for the rises are simple, says Kelly, who has spent a dozen years in the London market:. “People buy for a home, not just for investment, and they are affected by a lot of factors.”
The central London market, she says, is very different. Here, international investors play a stronger role; so, too, are the bankers from the City, who, traditionally, have ploughed some of their bonuses into bricks-and-mortar.
“Some of the investors are a little bit surprised because they thought they would get a better deal. The Italians are in the market. They have been very strong in South Kensington. We have seen them buying one and two-bedrooms in Clapham. The Iranians are here, the Arabs, not so many Russians. A lot of parents are buying for their kids. There are a few Irish around, but very few,” she said.
In general, however, matters are improving, she said: “The market has started to pick up. Again, people have sat around, waiting. They feel that now is the time to buy, and there isn’t a huge amount around so that is driving up prices.” But sellers have yet to commit fully: “They will wait around until the New Year before trying to sell. They will wait until January, February. There will be more properties then, but not necessarily any difference in prices.”
The drop-off in listings, normal at year’s end, has already begun to occur, according to property website, Rightmove, which reports that 95,000 houses in England and Wales are for sale, from 106,000 a month ago. The Royal Institution of Chartered Surveyors agrees.
Falling interest rates have helped, says Liam Bailey, of Knight Frank: “It saved us from a lot of pain now. But the risk is that it will have stored up problems for later. The market could stay sluggish for longer. Prices certainly can’t keep rising like this.”
In places such as Primrose Hill in north London, properties are still being sold rapidly, says David Godfrey of Sabbatical Homes: “Prime areas like that and St John’s Wood, Hampstead, Kensington and Knightsbridge are selling, but there is no stock.” The situation has been complicated by the need for sellers to offer Home Information Packs (HIPS) to potential buyers. Initially, HIPS cost over £1,000 (€1,120) to complete, though prices, with the recession, have dropped: “But it is still a cost. Before, it didn’t cost owners anything to put their house on the market to see what they might get for it.”
Mortgages, too, are harder to get, he warns: “It isn’t that easy to get one, particularly for first-time buyers, and banks and building societies will charge you a lot for it, if they will give it to you.”
Following the ending of the credit boom, the number of mortgage products available in the UK has fallen from a staggering 15,000 to 1,500 in two years, according to Fathom Consulting.
A demand for large deposits has curbed the market still further, even though the Financial Services Authority has pulled back from setting caps on loan-to-value, or loan-to-income calculators.
Now, however, the New Year is coming, complete with tax rises and a return to higher VAT rates, unless the chancellor of the exchequer, Alastair Darling, decides to back away from all indications given to date.
Last week, the British government expected official figures to show that the UK was no longer in recession, and senior figures were dumbstruck when the numbers showed the opposite. Darling has thrown everything her majesty’s treasury has, and a lot it does not, to kick-start the British economy. Neither he, nor prime minister Gordon Brown, can afford a repeat the next time such official figures make their way into Downing Street.
If they are, property prices will be hurt, and badly.
Moving to London: Leave plenty of time for househunting
FOR OVER a decade, and more, the Irish have been falling in number in London, but with the death of the Celtic Tiger and the attractions offered by a global city so near to home, the numbers are increasing again. Their experience will stand, or fall, on their success in finding a decent place to live.
The first lesson comes quickly, even at the cost of draining the colour from one's face, when an estate agent casually makes the mistake of assuming that a possible tenant's proposed monthly budget is the sum available per week.
Secondly, too many fail to leave enough time for finding a suitable place: "For those coming, the first issue is where do you want to live? Where do your friends live? This is a big city, and a lonely one," says Liza-Jane Kelly of Marsh and Parsons.
Like many of the Irish who came in the early to mid-1990s, Kelly went to Clapham: "It can be hard to meet up with people if they are on the other side of town, so bear that in mind."
Rental prices have been affected by the downturn, though, similarly to the sales market, the best properties at particular price levels in the best areas will always be snapped up, and quickly.
"The rental market in 2008 shot through the roof," says Kelly. "People were nervous about buying. People who had to sell had to find somewhere else to live so they rented, too."
The next few months will tell their own story. If house prices continue to rise, some current tenants will opt to buy before they go higher, creating short-term gaps in the rental stock and possible price falls.
One estate agent company, Kingleigh, Folkard and Hayward, this week warned landlords that prices are likely to remain "fragile" and that many tenants may struggle to pay their rents with unemployment continuing to rise. Like Kelly, David Godfrey of Sabbatical Homes urges tenants to leave plenty of time: "Be very clear about what you want, and make time for it. And make more time than you think you will need, because you will need it."
Location is the key. London, he says, is becoming safer, but places such as King's Cross, even though it is being massively redeveloped, are still "not safe" for women walking its streets late at night.
For those with families, the key is schooling. London-based Swedish parents, says Kelly, have tended to drift to Barnes because of the presence of a Swedish-language school, and a good overground train service into the City.
Godfrey agrees: "Schools are absolutely vital to any search. Check out the league tables, and the availability. It is difficult to get good ones, and it is impossible if you are not in the right area."
