Author: Patrick Alvarado

Twelve quirky ‘facts’ about the city we call home, by NVP

Black cabs will not necessarily stop, even if their light is on to say they’re available.

If you want to visit a ‘typical’ London pub, choose very carefully. They are not all quaint.

English people like talking about the weather as much as Italians like talking about food.

A shop that sells books is called a book shop, not a library – this is something quite different.

If in doubt say sorry; it’s a word Brits use a lot.

Many English people consider it completely normal to wear flip-flops in the middle of winter.

Most Englishmen are not inclined to go for a manicure or pedicure (despite their love of year round, open toed footwear) so be prepared for some strange looks if you do.

Potato chips are called crisps and come in every bizarre flavour known to man.

Although the London food scene is now ‘a thing’, many Brits still insist on splashing cheap vinegar onto chips – that’s fries, to you. Keep up.

Contrary to popular belief, it actually rains a lot more in Zurich and Milan than it does in London.

White vans are to be feared when crossing the road.

Brits love saying Bon Appetit. Just go with it.

In yesterday’s Autumn Statement Philip Hammond had the perfect opportunity to listen to the property professionals and remove the onerous SDLT increases brought in by the previous chancellor George Osbourne. We were disappointed however, though once again not entirely surprised, that the Chancellor did not reform stamp duty at the upper end of the market, or reverse the extra 3% recently introduced on secondary homes and BTL landlords.

The government also missed a trick to bring regulation to letting agents by creating a standard fee and instead opted to ban lettings fees charged to tenants altogether.  Clearly the government has failed to get to grips with the industry, as they don’t seem to realise that agents are not able to afford to absorb all these extra costs. They will now have to be passed on to landlords who will in turn increase their rents.

We can only turn to the immortal words of Sir Winston Churchill, at times like this, and keep buggering on.

For the first time since we opened our doors for business in 2014 we have found that our rental income, for the last 3 months, has overtaken our sales income. This has come as no surprise to us at NVP. We were expecting the sea change and believe the trend is here to stay for the next couple of years while our government implements Article 50 and negotiates new trade agreements with Europe and the rest of the world.

This seems to correlate with the other leading estate agencies, most of which are anticipating more properties being available to rent than for sale in 2017.  Recent data relating to the PCL super-prime lettings market regarding transactions above £5,000 per week show an increase of 16% compared to last year, as top-end sales slow to a crawl.

For many wealthy individuals looking to buy a seven or eight figure home in the UK the sums don’t add up.  As Knight Frank’s head of super-prime lettings Tom Smith points out, the stamp duty on the purchase of a £15m property is £1.7m, which is the equivalent to three years rent.  Yields can reach between 3.5% and 4% for best-in-class super-prime properties due to their relative scarcity, which compares to less than 3% across prime central as a whole.

This is not to say the news relating to prime sales is all bad. Deals in excess of £30m rose by 28% this year compared to last, so each to their own!

After a subdued 3 months post the referendum we crossed our fingers that we would see a pick-up of activity heading towards the Christmas period. Our expectations, or rather our hopes, have been realised this week as we have received more offers on our properties than we’ve seen in the last quarter.

We are finding that offers coming in on properties which have already had a price reduction are within 5-10% of the new asking prices.  However, those properties which have seen no price reductions throughout their marketing period are failing to receive offers or are receiving offers 20%-30% below their asking prices. This seems to dovetail in quite nicely with recent data released by LonRes for Autumn 2016 which shows that ‘Almost half of homes sold in the three months following the referendum had reduced their asking prices before finding a buyer’.

Our advice to vendors who’ve been on the sales market all year and who wish to close before the year end is to reduce their asking prices now, or be prepared to wait until 2017 .

After the first full year under the new stamp duty system it would seem that HMRC has had a small gain in revenue. However these figures are somewhat deceiving, and if one extrapolates the increase in transaction in March 2016 to beat the extra 3%  stamp duty on secondary homes, then the net SDLT receipts will show a loss. We believe that next quarter’s figures will paint a bleaker picture as the pronounced slow-down in transactions in the South East starts to trickle down through the rest of the country which up until now had still been seeing continued price growth.

Impacted by onerous transaction taxes, and further compounded by economic uncertainty, the UK’s super-prime market has been under downward pressure since SDLT changes introduced in 2014.  Further evidence of this is seen in the recent Land Registry data released which shows just 5 transactions taking place over £10m+ in the three months till August 2016.  That’s down 86% on the same period in 2015, when 35 £10m+ sales were officially registered.  It’s important to remember, however, that the very nature of super-prime deals means that many never end up on the official register.

We can only hope that there is a continued downward pressure on sterling and that the Chancellor sees sense and takes the opportunity to reduce the stamp duty thresholds, now that the tax receipts seem to show a decrease in revenues coming the government’s way.

Due to the fall in prices in PCL over this year, coupled with the sharp, post Brexit fall in sterling against the dollar and the euro, we are beginning to see more buyers stepping into the market and beginning to make offers. As we mentioned recently, we are finding that vendors who are pricing their properties correctly in line with current market conditions are achieving offers at asking or very close to it.

There are, of course, other types of buyers out there: those who want to buy but who feel that prices and sterling will continue to fall, and then those who are trying it on and putting forward ridiculous offers. For those buyers waiting for a further fall in prices and sterling, all we can say is that they may be right and they may be wrong, however it is very hard to call the bottom of the market. Our advice for those who are looking to buy a home or a rental investment, and are prepared to hold on to it for 5-10 years, is that stepping into the market now, at  a discounted rate of 15%-35% from the peak of 2014, seems like an opportunity not to be missed.

For those buyers putting in ‘ridiculous offers’, our guess is that these are probably the same people who’ve not bought in the past 10 years, waiting for the market to collapse, and they will probably still be there in a decade’s time!

Back in the real world, there are buyers who have been telling me that they are keen to buy but want to wait and see if the Chancellors autumn budget on November 23^rd sees stamp duty or primary and secondary homes come down.  If this is the case, then surely over the next couple of weeks is the time to agree a sale, as by the time the solicitors have done their due diligence and are ready to exchange we should know if the budget has seen the chancellor lower the stamp duty thresholds.

Following yesterday’s conservative conference, and Theresa May’s speech confirming that Article 50 of the Lisbon Treaty will be invoked no later than March 2017, we have seen sterling reach a 3 year low against the euro (£1 =€1.1460) and a 31 year low against the $ (£1 = $1.2796).

The devaluation of sterling, as well as further vulnerability in the weeks ahead, bodes well for foreign buyers looking to take advantage and step into the PCL market this autumn. However, if the government wants to see inward investment to help prop up the market in PCL to bring transaction levels back in line with figures seen over the past couple of years then the chancellor is also going to have to review the current SDLT levels in this autumn’s budget.

Our message at NVP continues to be positive for those vendors who price their properties in line with current market conditions as we are seeing increased viewing levels on properties which are priced correctly.  The autumn market is a short one, so any vendors wanting to sell before Christmas need to listen to their estate agent to avoid disappointment.

Generation Rent is no longer simply theoretical. It’s here to stay for another decade, according to PWC, who say that by 2025 only 40% of Londoners will own their own home. That marks a U-turn on the situation in 2000, when 60% of Londoners were homeowners. By 2025, say PWC, the majority of 20-39 year olds will be renters.

This is standard practice in the rest of Europe and tenants will be looking to get greater security of tenure with rental contracts often lasting 5-10 years. Besides the security that offers to the tenant, landlords will have the benefit of tenants they know and can trust over a long period; no void periods to worry about; none of the expense and effort associated with having to find new tenants every year or so.

The rise of a long-term rental culture could also be seen to offer a more flexible and mobile lifestyle – a plus for young professionals who are still working out where they want to put down roots.  Renting will increasingly be seen less as a temporary last resort, but more as a viable and valid option. Good news for landlords and tenants alike.

It would seem that after a slow summer the autumn market is off to a good start with a substantial increase in viewings from prospective buyers. Vendors who are pricing their properties more realistically are attracting offers close to their asking prices.

Here at Nicolas Van Patrick we are relieved by this but not entirely surprised, as domestic buyers who are willing to step into the market now are getting 10-15% of capital values, from the peak of the market back in 2014, and international buyers whose currency is pegged to the US dollar or Euro buyers are getting another 10-15% on the currency conversion.

Bearing these significant discounts in mind, we’d say this is an excellent time to buy in London.