Author: Nic Pejacsevich

The first Budget for new Chancellor Rishi Sunak was always going to be dominated by the coronavirus, with plenty of support measures rightly announced for those people and businesses who have so far been affected.

But there was mention of housing too, and the proposed stamp duty surcharge on overseas investors buying property in the UK, which had been trailed in the Conservative party manifesto, became reality. Well, almost, as it will not come in until April next year and will be set at 2 per cent, rather than the proposed 3 per cent. Although a stamp duty hike for non-UK property buyers had seemed a certainty before the Budget, we had hoped that the Chancellor might take the opportunity to backtrack in light of the Covid-19 epidemic, so it is a shame that he carried on regardless. Perhaps the delay in introducing it is down to fears that the market would have struggled to cope with its immediate implementation, given what else is currently going on. A 12-month delay, on the other hand, will give buyers time to organise themselves and reduce any harmful impact on the housing market.

Although the surcharge brings the UK into line with many other global property markets, frustratingly it will no doubt put the brakes on again just when we were beginning to see the London market on an upward trajectory. However, on the positive side, many foreign buyers purchasing in other currencies will be able to absorb this extra 2 per cent within the foreign exchange currency trade and still benefit from the downward correction in prices since the peak back in 2014.   

At Nicolas Van Patrick, we still feel that London property looks fair value when compared to other global cities, and those buyers who wish to proceed can still do so before the 2 per cent surcharge comes into effect in April 2021. We are also grateful that a mansion tax, which was widely speculated about in the press before the Budget, didn’t come to pass. Perhaps, in the end, it turned out to be a step too far for a Conservative Government.

The number of respected agents and commentators calling the bottom of the housing market is steadily increasing. But if there is a sure sign that the housing market is really turning a corner, it is the return of ‘real emotion’. We have noticed that buyers are getting angry again because they not always getting what they want. While this can be stressful for agents who have to bear the brunt of it, in many ways it is something to be celebrated as it is a sign of market recovery.

At Nicolas Van Patrick, we are having uncomfortable conversations with buyers, the like of which we haven’t had around Knightsbridge for five years. We are used to having such discussions with sellers, along the lines of: ‘the price is too high and given that there are not many buyers out there, you have to price your property accordingly’. Until now, vendors have reluctantly accepted offers in order to secure a sale, and such deals have been largely unemotional.

There has not been much impetus to spur on the buyer but recently we have seen a change as more buyers come to the market. For example, we had a buyer recently who felt under pressure because while a vendor had accepted his offer, there was now another offer from another buyer on the table. Of course, estate agents are obliged to pass on all offers to the vendor but in recent times there haven’t been that many of them. However, lack of supply, several agents calling the bottom of the market, and Zoopla reporting a 1 per cent rise in London property prices year-on-year in October following a period of year-on-year price falls, suggest something is beginning to change.

Buyers who have been sitting back and waiting are now coming to market. The general election result has provided some clarity, which is encouraging people to get on with things. Our message to buyers is that this is the best buying opportunity in a decade but don’t be too relaxed as the rug may be pulled out from under you. London remains an attractive place to buy and comparatively cheap with prices correcting quite significantly in some areas. Just try not to get too worked up about it.

With so much uncertainty around, created firstly by the UK’s proposed departure from the European Union and latterly the general election, it is no surprise that the rental market is so strong. Many people want to retain as much flexibility as possible, preferring not to make as serious a commitment as purchasing a property, but renting while they ‘wait and see’.

Various reports into the prime lettings market have suggested that rents have strengthened this year, particularly in the £5,000-a-week bracket. The weakness of sterling means that US tenants in particular have more spending power, while stamp duty levels being what they are means that if you are renting for five years or less you would often be better off than if you had bought that property.

At Nicolas Van Patrick, we have enjoyed a record number of rental renewals recently. We put this down to our first-class property management service and lack of prime rental stock in the area. We have also recently expanded our rental offering to reflect this growth in lettings, with Alice Umfreville joining as Lettings Manager.

On joining Nicolas Van Patrick, Alice says: ‘The market is very price-sensitive but is undeniably busy. Properties which come to the market at too high a rent will sit there but landlords who are prepared to take advice on pricing and presentation are seeing a lot of interest.

‘There are particular rental brackets which are showing huge interest with not nearly enough stock to satisfy demand.

‘Our tenants are mainly European and from the Middle East, with a smattering of Americans. Many are not potential buyers at all but simply wish to rent. Many are couples, looking for a rental close to their place of work. People are thinking about the length of their commute and how much time they want to spend doing it – ideally many want to be within 10 minutes to half an hour of the office. Knightsbridge is very centrally located, of course, plus has the bonus of some good restaurants and shops. But we are finding that a short commute to work is the main draw.

‘As a boutique agency, we have the freedom to do things differently and work in the best way for our clients. There are many corporate agencies which don’t have this strong focus because they have so much red-tape to deal with.’

If you have a property sitting unlet or becoming available do let us know as we would be delighted to assist.

As autumn settles, the prime central London property market remains tricky and price sensitive. There is a continued shortage of stock and agents are clamouring for business. But at Nicolas Van Patrick we believe it is important to stick to our guns and give realistic advice to clients when it comes to pricing their home for sale, backed up by irrefutable evidence.

This practice stood us in good stead recently when we were asked to join a parade of agents to value a house in Montpelier Walk, Knightsbridge village. The owner had bought the property for £3m several years ago and it is a sign of the times that we valued it at £3.35m in the current market. Given the stamp duty the vendor paid when purchasing the property, achieving this sale price would effectively mean he was losing money. As we left, he told us that we had indeed given the lowest valuation of all the agents, so we thought we had missed out on the instruction. However, he chose to instruct us regardless because he understood that we were giving a truthful picture of the market, backed up by facts. We had been selling houses over the past few months in that area which justified our pricing – we could prove that we knew what we were talking about.

While preparing the brochure ready to launch we showed a serious buyer around who immediately made a bid below asking price. This was rejected but we were able to back up with comparisons as to why the house was worth more and following two consecutive increased bids, we agreed a deal at 2 per cent off asking price before even going live with it to the market. Contracts were exchanged within the week. 

What this demonstrates that the price your home comes to market at is essential if you are keen to move. Part of the reason for this is that when it is launched on portals such as Rightmove and Zoopla you will get the most views by potential purchasers. But also, if you over-value your home, it will sit there until buyers feel it is priced correctly. There is every chance you may not end up with as much as you would have done if you had started marketing at the correct price.

Although we are supposed to be the experts, some vendors feel they know more when it comes to their property. Or they feel that their property is special so they want to market it at a higher price than we would advise. Often, they try for a bit more because they expect buyers to negotiate downwards and they want to leave room for this. Added to this, if vendors are not in a rush to sell, they may be happy to wait to see if they achieve their desired price.

Mostly though, vendors are realising that if they overprice their property, they won’t even get a sniff from a buyer who will completely disregard their property on the basis that they are not a serious seller. Our advice is that you can never undersell a property if it is marketed properly as well-informed buyers will compete and push the price upwards, even in this tricky market.

What’s in store for the housing market this autumn ahead of the 31 October Brexit deadline?

As the Brexit deadline of 31 October looms, the big question as we head into autumn is what impact it will have on the housing market. Although, sadly, Nicolas Van Patrick does not possess a crystal ball, we feel that the autumn market could see both buyers and vendors holding off until there is some clarity. This is not just to do with Brexit, but also stamp duty and the threat of yet another general election – issues which have kept the property market in the doldrums since 2014.

Stamp Duty:  Most agents in PCL have reported a pickup in transactions over the last quarter, with some calling the bottom of the market. But we may still see buyers taking their foot off the gas while they wait to see whether Chancellor Sajid Javid tinkers with stamp duty, as was recently reported in the press. Such comments create uncertainty, particularly as stamp duty reforms have cost the Treasury more than £1bn in receipts, and it is understandable if buyers and vendors hold off to see if thresholds are lowered. Talk of passing stamp duty onto the seller rather than the purchaser would mean a radical overhaul to the current system, which would disrupt the market while people adjust. Although such a plan was swiftly denied by the Chancellor, a seed of doubt has been planted in people’s minds.

Brexit: With the Brexit deadline of 31 October fast approaching, and Boris Johnson asking the Queen to suspend Parliament until 14 October, this will create further jitters for the property market, with both buyers and sellers likely to hold off from doing anything unless they absolutely have to.

General Election: There is increasing speculation that the Tories will call a general election over the next few months, which will have a cooling effect while people sit back and await the outcome.

In amongst all this uncertainty, there will always be people buying and selling property because they have to, regardless of any of the above. Furthermore, we have four or five years of pent-up demand from both domestic and international buyers who are waiting to step back into the market once all the uncertainty is behind us. With sterling hitting a 10-year low against the dollar last week, and Boris Johnson’s actions in suspending Parliament sending the Pound on yet another downward spiral to $1.22, many of our clients/buyers are already doing foreign exchange trades in preparation to step into the market. Others are holding off to see if there is another drop in the exchange rate should the UK leave Europe with a hard Brexit, providing further buying opportunities.

All the above said, lack of supply and the favourable exchange rate which foreign buyers are benefitting from, means that if you are selling a trophy property, you will still get a very good price for it simply due to scarcity of quality stock. As for the rest, it needs to be heavily discounted for buyers to push the button on it now rather than sit back and wait. Once the dust settles, and not withholding any other global cataclysmic events, we see further pick-up in activity in the sales market with a hardening of prices while the supply and demand glut is satisfied. 

Lettings Market

In the second quarter of the year, scarcity of stock supported rental growth in PCL, but high levels of renewals have meant few new lets. The third quarter is usually a busy rental period as people want to be in their new home before the schools go back but we don’t see any change from Q2. Limited supply and robust demand will continue to underpin increases in achieved rents.

There is further upwards pressure on rents thanks to the Tenancy Fee Ban, which came in on 1 June. With agents and landlords not able to pass on many of the costs associated with renting property to the tenant, such as referencing, check-in, contracts and more, some landlords have passed these onto the tenant by increasing the rent.

While there is still so much uncertainty, what is clear is that this autumn is likely to be one full of twists and turns for the housing market.