10 May 2009

Why quality is the key to a sale in the London housing market

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From
May 8, 2009

Why quality is the key to a sale in the London housing market

In a tough property market, anything less than the very best is exposed — whatever the price bracket

One succinct sentence sums up the priorities for today’s London buyer: “It should be well-furnished, have luxury fittings and lots of space”. These features, listed by Julian Gardner, a first-time buyer, persuaded him to spend £215,000 on a one-bed flat at the Hornsey Road Apartments development in North London. His criteria also offer sellers a valuable insight into their own home's marketability.

Gardner, 39, a graphic designer, pictured right at his new home, had been looking for about six months and felt it was the time to buy. He saw other developments, but these were more expensive and had less space, thus proving that buyers will bite only when they perceive a good deal on a home in which they genuinely want to live. “In my experience, new-builds tend to cut corners but this development seemed like it hadn’t skimped on anything,” Gardner says, “and it is close to town and easy to get to places like Camden and Angel.”

Estate agents back this up, reporting a lot of demand and competitive bidding, but only for good-quality homes at the right price. “This is the value effect,” Yolande Barnes, research director of Savills, says. She has identified that a flight to “best-in-class” bargains — good quality homes in coveted locations — rather than homes that are cheap and noisy or built with low-quality materials, is in turn leading to higher offers on properties, as long as they are priced competitively. As Paul Vallone, managing director of the developer Berkeley Homes, says: “In a hard market, poor quality is exposed. People won’t buy where mistakes have been made.”

In London, what is selling and what is not reflects these rules of engagement at every level, from super-prime pads down to first-time-buyer flats. Sellers should not be disheartened. If their home makes the grade, they could find bids pushing the sale price above the asking price. Douglas & Gordon, an agent based in southwest London, has reported that sales prices rose by 1.6 per cent in the past three months, and that offers received and agreed were higher than at any point in the past 12 months — a sign that market forces are at work.

Super-prime

The market for the plushest properties that London has to offer is not so buoyant. James Geddes, of the buying agent Property Vision, says that fewer than ten houses priced between £4 million and £10 million have sold in London this year, compared with about 30 the previous year.

Unlike other levels of the market, the pool of potential buyers at the top end is much smaller, Geddes says. “Buyers are no longer prepared to shell out for anything less than their ideal property.” This has reduced super-prime prices. According to Savills, the higher your home’s value, the faster it is falling. Prices of super-prime houses (those from about £5 million) fell by 5 per cent in the first quarter of this year. “Ultra-prime” (homes costing at least £15 million) fared even worse, falling 8 per cent.

Prime

For some homes, there is always a market. Ed Mead, of Douglas & Gordon, says: “Properties in prime hotspots such as Knightsbridge and Belgravia at up to £1.5 million are selling for the same prices as 18 months ago.” White stucco townhouses in coveted postcodes such as SW1 and SW3 are still selling well because there are few of them.

Flats in central but less sought-after locations, such as Westminster, are proving popular with international buyers looking for a pied-à-terre. They want to take advantage of the weak pound and low prices. Two years ago, 50-60 per cent of buyers there were foreigners. That figure is now nearer 80 per cent, agents say.

Stuart Bailey, of Knight Frank’s Belgravia office, says: “The buzz on the international circuit is definitely that now is the time to be in London. These buyers are looking for a good opportunity in terms of value, but they are also after something low-maintenance.” Four properties at Ten Rochester Row, a Barratt development five minutes’ walk from St James’s Park Tube in Westminster, have sold since the launch in March to buyers from Pakistan, Spain and the US. There are 30 properties left, from £580,000 for a one-bedroom flat to three-bedroom penthouses from £1,400,000. Details: 020-7828 6631, tenrochesterrow.co.uk

Family homes

These have stood up well. For example, in Harrow, northwest London, the average cost of a four-bedroom detached house has dropped just 6 per cent since its 2007 peak, to £590,000, according to Hometrack. Viewings are up by as much as 200 per cent, local agents say. Homes on the most popular streets are also not short of buyers. The agent Currell has sold three three-bedroom properties on Lavender Grove, in London Fields, Hackney, in the past three weeks. All achieved close to the asking price and there were at least two offers on each.

Ian Crawt, of Currell, says: “The only difference between the houses that are selling and those that aren’t is realistic pricing. One of the properties that we sold for around £575,000 would have probably gone for £675,000 18 months ago — but sellers are being more realistic now. We sold it within three days.”

City flats

New-build flats, priced £400,000 to £500,000 and built to cater for young professionals working in Canary Wharf and the City, have been hit hard. Many are now back on the market. In areas saturated by new-builds, only those properties that stand out from the crowd are selling. Max Wilkinson, of the agent King Sturge, says: “The flats that are selling are either right on the river, which is always going to command a premium, or have been taken care of by a long-term renter or owner-occupier.”

First-time-buyer homes

Despite lower prices, lending restrictions now force first-timers to stump up a typical 25 per cent deposit for a mortgage — which would mean finding £50,000 for a fairly standard £200,000 flat in Central London, and that’s before before stamp duty and solicitor’s fees. The properties they are buying are either significantly cheaper than their competitors or are via shared ownership or shared equity schemes. At Grainger’s Hornsey Road development, one-bedroom flats start at £175,000 and two-beds at £250,000. Given that the average price of a one-bedroom flat in Islington is £285,591, it is perhaps no surprise that 75 per cent of the first phase has been reserved since its launch in March. Details: hornseyroad.co.uk

Marc Vlessing, director of Pocket, an affordable housing developer, says: “First-time buyers are out in force, sifting through affordable housing options to find which suits them best.” Pocket, which sells flats at up to a 25 per cent discount on open market rates, has sold eight flats in six weeks. It has one and two-bedroom flats in Ealing, Hounslow and Camden, for people with an annual income of less than £60,000. The flats are compact but, unlike shared ownership or equity schemes, you buy the whole flat outright with just one loan. Details: pocketliving.com

Meanwhile the Government’s new shared equity scheme, HomeBuy Direct, has proved extremely popular since its launch in March. All 26 allocations at Kennington Park Square, South London, have sold, and three more have sold through other government schemes designed for first-time buyers.

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