The latest residential property market report from Black Brick also says that the Help to Buy mortgage guarantee scheme, launched earlier this week, is likely to fuel competition in the sub £600,000 market and could take hundreds of tenants out of the rental market.
‘Sealed bids and fierce competition remain part and parcel of the market for the best homes in London as growing international and domestic demand continue to outstrip supply,’ said Camilla Dell, managing partner of Black Brick. ‘From a global perspective, the recent volatility in emerging market asset classes has further reinforced the attractions of prime central London property as a safe haven asset to the fast growing global pool of high net worth individuals,’ she added.
In the three months to the end of September 2012, Black Brick completed on £32 million of property for buyers from five different countries. In the same period in 2013 it completed on properties with a combined value of £53 million, a rise of just below 66% for both investors and owner occupiers from 10 separate countries, double the number of nationalities from 12 months ago.
‘The overall message from both data points is, we believe, unequivocal. International interest in prime central London is strengthening as international interest continues to widen,’ said Dell.
The firm has also completed on a number of investment properties for clients at or below £1 million in recent months and Dell said that this segment of the market continues to enjoy the strongest price growth. Among these recent deals was a three bed, three bathroom apartment in a modern portered building acquired for an overseas client as a buy to let investment for £675,000.
Further afield, the firm recently completed its first acquisition of a Scottish estate. ‘This very important Ayrshire property close to the West Coast of Scotland and with some 150 acres of accompanying land had been on the market for several years with major agencies without a single offer. We were able to match this unique property to an Asian buyer who had also been looking for the right estate in Scotland for some time,’ explained Dell.
‘Scotland is not our usual market, nor do we expect it to be. However, we believe that high end property is a personalised and not a commodity market, and that success is all about matching the right buyers with the right properties,’ she added.
The sheer breadth of origins of buyers is astounding. In recent weeks the firm has signed some 20 new clients from countries including Nigeria, Saudi Arabia, Zambia, Turkey, Mauritius and Azerbaijan. Calls from prospective UK resident clients also gives further ammunition to the argument that domestic interest in prime central London property is reawakening and 30% of our new clients over the past month have been UK citizens.
Dell also pointed out that competition in the London market on property below £600,000 is likely to rise as a consequence of the second tranche of Help to Buy, which the government unexpectedly brought forward.
‘In our view, the intervention into the market in this way may not be for the better. Undoubtedly, the market sub £600,000 is likely to rise and get quite competitive, particularly as the second phase isn't limited to just new build,’ she said.
‘The knock on effect is also likely to cause changes in the lower end of the rental market. Help to Buy will potentially take hundreds of tenants out of the market and could cause rents for properties valued up to £600,000 to fall. In central London, this is likely to be seen on one bed and studio flats,’ she added.
According to the firm yields on prime central London residential property currently range from below 3% to 5%. ‘Despite Help to Buy taking tenants out of the market, with the domestic economy picking up and even the much maligned banking sector showing signs of a return to health, we believe that demand for rental properties in the right areas will remain strong,’ Dell pointed out.
