February Market Update

Let The Good Times Roll

With inflation on a downward trajectory, cheaper fixed rate mortgages on offer and loan approvals on the up for the first time since 2021, estate agent Knight Frank has also had an attack of new year’s optimism.

The firm has upgraded its UK house price forecast. It now believes prices will grow by one per cent in prime central London this year and by two per cent in prime outer London. Across the UK it believes prices will climb three per cent.

The reason for its relatively subdued assessment of prime London property is simple: the upper echelons of the market will be more sensitive to fallout from this year’s General Election, delaying a stronger recovery until 2025.

But by 2028, Knight Frank expects to see prime central London’s prices up by 18 per cent, and prime outer London prices increased by 15.4 per cent.

More forecasting good cheer comes from the notoriously pessimistic think tank Capital Economics. It expects UK inflation to fall to 1.7% by April, the first time in two years that the UK’s annual rate of inflation would be below the Eurozone and US. It believes that, as a result, the Bank of England will begin trimming the base rate back in June, making mortgage finance more affordable.

At Black Brick we have been busy touring homes with some of our best international clients. “Sentiment is massively improved,” said Camilla Dell, managing partner of Black Brick. “I get the sense that prices have bottomed out, and we have definitely seen sellers becoming more and more realistic when it comes to pricing.”

A case in point is a home in Knightsbridge which went on the market in May 2023 for ￡13.5m. Its price was gradually dropped, hitting ￡10.5m in December. That is when Black Brick stepped in and secured the property for a Middle Eastern client for ￡10m.

“Was it a bargain? Probably not,” said Dell. “But it was definitely a good deal, 4% below the next most recent sale on the street, and a very good example of how sellers who want to get on are becoming much more realistic over their asking prices.

“Stock coming on to the market this year also seems to be more sensibly priced, with the exception of some off market stock where some homes are still very overpriced.”

First Amongst Equals

With activity beginning to return to central London, the most sought after neighbourhoods in town have emerged as Chelsea and Mayfair.

In the ￡5m plus market, Savills reports that Chelsea saw the most sales – 12 per cent of all prime central London deals closed in 2023 – closely followed by Kensington and Belgravia.

Meanwhile, in the rarefied ￡10m-plus market it was Mayfair which led the way. According to research by estate agent Beauchamp Estates, more super prime homes were sold in W1 than anywhere else last year.

What these neighbourhoods have in common is liveability.

“After covid, what people really want is a local high street with excellent independent shops and services and a sense of community,” said Caspar Harvard-Walls, a partner at Black Brick. “Chelsea Green and Pavilion Road, in Chelsea, are really good examples.”

Belgravia’s ascent can be put down to tremendous recent investment by its dominant landowner Grosvenor. Schemes like Eccleston Yards, with its trendy bars and restaurants, have helped entice younger buyers.

But there is one big name absent from this list. When Black Brick opened 17 years ago, Knightsbridge was riding high, an international brand name which attracted premium prices with developments like the ground breaking One Hyde Park.

Today, Knightsbridge is less in demand. “It suffers from really bad management due to the fact that it does not have a dominant freeholder, like the Cadogan Estate in Cheslea,” said Harvard-Walls. “The public realm is bad, there is a real mish-mash of shops and it is congested.”

On the plus side, this means value for money is, relatively speaking, now better in Knightsbridge than in Mayfair et al, with houses trading for around ￡2,500-per-square foot.

Location, Location, Location

On paper 60, Curzon Street sounded like a sure fire winner when the first of its 32 apartments went on sale in 2020.

The boutique development had a Mayfair address, and was designed by starry US-based architect and interior designer Thierry W. Despont, his first major residential development in Europe. Despont’s profile is high with international buyers since he has worked for clients including Bill Gates, Calvin Klein and Oscar de la Renta.

And ever since Westminster Council banned new apartments of more than 200 sq meters from being given planning permission, experts have been warning that the supply of supersized flats is going to dry up soon.

However it has now emerged that Brockton Capital Fund, owner of the ￡600m site, has gone into administration, amidst claims of slower-than-expected sales. Interpat Advisory has stepped in to take control over the scheme.

In a market where quality really counts, Dell is not totally surprised the scheme has floundered. “It is Mayfair, yes, but it is not prime Mayfair like Grosvenor Square,” she said. “It is a bit off piste, and that has been the problem. They have sold some units, but not enough.

“The trouble is that there are new builds, and new builds. If you are going to be paying the highest prices per square foot that there are in London then it pays to take some advice.”

The news of Brockton’s demise might have given Phones4U billionaire John Caudwell pause for thought. His 29-unit, ￡2bn development, 1, Mayfair, is on Audley Square, a five minute walk from Curzon Street, and has been designed by another American starchitect, Robert AM Stern.

The homes only went on sale last year so it is too early to tell whether it will fare better than its superprime rival. Watch this space.

Back to School

With a general election on the horizon the main political parties are starting to dribble out news about policy.

The Labour Party, currently galloping ahead in the opinion polls, has announced that it intends to introduce tough new regulations for estate and letting agents. Matthew Pennycook, the shadow housing minister, wants a national licensing scheme for firms, and a ban on anyone working for an agent without at least one A-level.

In central London, Dell said most estate agents are well run and professional. A bigger problem for buyers, she said, is the sheer complexity of the market, and of the buying system. There is no easy way for buyers to research all the homes for sale in their chosen area – they will be listed on different portals and some are not listed at all, if their owner prefers a private, off-market approach. The estate agent industry has splintered in the capital too, with numerous agents setting up shop on their own, leaving buyers with a huge number of potential agents to contact.

And, of course, estate agents are employed by vendors. Although there are standards in terms of information they are supposed to give buyers they will, naturally, wish to talk up the virtues of a home they are selling. “The point of a buying agent is that we can navigate the splintered market, and point out pitfalls,” said Dell. “We make sure our clients go into a deal with their eyes open.”

Acquisition of the Month 1: Hans Place, Knightsbridge, SW1X – ￡10,033,560

Our client was looking for a family home for their regular visits to London. Must haves included four to five bedrooms, air conditioning and a lift, and they didn’t want to take on a renovation project.

It took us almost a year to find our clients the perfect home. We first spotted the house when it came onto the market in May, with a price tag of ￡13.5m. This was outside of their budget so we bided our time, waiting for the price to drop to ￡10.5m. We negotiated a sale at a fraction over ￡10m, or just less than ￡2,400 per square foot.

The seven bedroom house is in a great location, overlooks a private garden square, and had all the mod cons our clients wanted, plus a 48-ft garden.

We then put our client in touch with our team of lawyers and surveyors, who helped them exchange contracts in less than three weeks. Black Brick will also be managing the property for our clients post purchase via our dedicated Home Management Service.

Acquisition of the Month 2: Clapham Common West Side, SW4 – ￡5,500,000

Our British clients were returning home from overseas and needed to find a large family home with five or six bedrooms. They also wanted a home office, a wine cellar, off street parking, and air conditioning. Good local schools were a must.

This search had a fixed time limit – they needed to be settled in by the summer of 2024.

We found them a refurbished and extended 5,500-plus square foot close to Clapham Common which perfectly fitted their requirements.

Unfortunately there were other buyers interested but, by following our advice, they were able to secure the house (for less than ￡1,000 per sq ft) and exchange contracts within just three weeks. The entire process took less than two months.

Finding Perfect Property Podcast.

In episode 15, Camilla chats to Nimesh Shah, CEO of Blick Rothenburg, a leading tax, accounting, and business advisory firm, and “stamp duty guru” Sean Randall, a tax partner at Blick Rothenberg with 20 years’ “Big Four” stamp duty experience.

Click here to listen on Spotify.

Click here to watch on YouTube.