HONESTLY, WHO would be British at the moment? Our economy is in tatters; our wealth, it turns out was purely imaginary – a kind of collective psychosis encouraged by estate agents; and now our currency is on its knees.
For several years, the one good thing about being British has been our ability to holiday in countries remarkably nicer than our own, chuckling smugly as we strew about Toytown euro notes with reckless disdain. But it’s a caravan park in Bognor for the lot of us for several years to come.
And more gallingly still, while we try to choose between ready-meals from discount supermarkets, our department stores, our upmarket restaurants and even our estate agencies are filled with Europeans bandying about worthless pound notes with self-satisfied smiles. For anyone in Ireland who has managed to hold onto their euros, a falling domestic housing market and dodgy Icelandic savings accounts notwithstanding, the British property market – more specifically, the London one – must surely be something of a temptation.
The price drops in this country have been something of an eye opener: “No one can believe just how fast the market has dived,” says Lulu Egerton of Strutt Parker’s Chelsea office. “We know it’s not 16 per cent , more like 25 or 30 per cent.” But, when combined with sterling’s decline over the past few months, the figures become quite unbelievable.
“The euro was worth 72.9p at sterling’s peak in 2008,” says Michael van Klawitter of the investment bank, Dresdner Kleinwort. “On December 31st, it almost achieved parity at 98p. We have had a slight correction since then but the Bank of England is seeing weakness in sterling as part of the solution . Sterling will weaken further and the euro should return to parity again.”
Call it a bargain, call it economic schadenfreude, the fact is that UK properties are now worth between 40 and 50 per cent less than they were last spring. By way of example, Strutt Parker has a house in Cadogan Street, a top London address, for sale at £1.95 million or a shade under €2 million at the euro’s strongest point. When it was launched, its price was £2.75 million and £1 was worth a healthier €1.3 – for us – making it €3.575 million. So, with a little hard-nosed bargaining, a house like this could be bought for roughly half its value nine months ago.
The posher estate agencies are all claiming a great deal of interest from overseas buyers: not just Europeans but those who might use euros and/or dollars on a day-to-day basis: Middle Easterns; the mysterious Kazakh plutocrats we have started to hear about. And Italians. Everyone I speak to seems to have witnessed some serious Italian cash-splashing in the past month or so (the Italian tax year ends on December 31st and I am not convinced the two things are entirely unrelated). And, you will be pleased to hear, there have been consistent sightings of Irish buyers as well.
“We’ve had a lot of Italian activity in Chelsea,” says George Franks of the Douglas Gordon chain.
“The French have been busy around Battersea and we have had Irish buyers turning up again in Clapham and Balham. If you’ve got euros, why not?”
In fact, according to research by Savills’ analyst Lucian Cook, there has been a 70 per cent rise in international enquiries since the Bank of England started to slash interest rates in November.
“Residential property looks cheap by international standards,” he says. “Savills’ research department believes that the recovery in the prime central London markets will again be led by equity-rich, overseas investors. There are already signs that these buyers are becoming active.”
The “again” in Cook’s analysis is interesting because, according to his figures, it was eurozone buyers that got the central London market bubbling again after the 9/11 drop: Americans disappeared and Europeans piled in, tempted by price drops and slashing of interest rates.
But just consider for a moment how tempting the London market would be without sterling’s devaluation.
As mentioned before, our economy is looking extremely unwell and the people who might have paid top whack for rental apartments are now mostly unemployed or repatriated. And although many analysts – including Cook’s colleague at Savills, the influential Yolanda Barnes who, legendarily, called the last recovery – are predicting that the market will stop falling in the autumn of this year, no one is claiming it will start to rise for a couple of years after that.
There are even whispers that it will not match peak values until 2014, possibly 2017. So, this is looking like a very long-term investment.
That gloomy prognosis has to be matched with the sheer opportunities available. The London seller has now been battered into submission, offers – “cheeky” or “realistic” depending on your standpoint – are being accepted and there is a lot of stock out there.
Book yourself a weekend break and agents will happily fit in dozens of viewings for you.
“I tell you,” says Egerton, who gamely volunteers that she bought at the height of the market and “won’t be able to move for years and years. If I was a euro-rich buyer, I would snap up about a third of the houses on my books at the moment. They are unbelievably good value.”
For the short-term, the re-emergence of the euro buyer is cheering up estate agents no end and who would deny them a little succour at the moment? And, never ones to fail to capitalise on a silver lining, I look forward to the very near future when all estate agency offices sport signs outside them saying: Bienvenue, Benvenuto, Willkommen and, of course, Fáilte.
