I was sitting down with an agent last week, whom we’ve done business with previously. He was filling me in with what’s happening on the street. His office tied up approximately £300k of fees in the month of December. Good going considering this is supposed to be the quietest time of the year in property.
Deals are being done, ones which are way below the asking price. He rattled off several, one which was £1.5m off the £6m asking price. I recalled having seen one of the ones he mentioned several months ago, a large lump in Bryanston Square. We were avoiding large pieces at the time, having already been stuck with some we were trying to sell.
The frenzy to purchase has been caused by the soft pound and the current geopolitical uncertainty. Frenzy can cause strange things to happen. Several properties which are overpriced sometimes managed to get sold. For example, properties have gone for £1,200 per sq. ft. in blocks where we had purchased for £730 a sq. ft.
Lots of money is coming from overseas, the Arabs are buying, as well as many politically connected people, flush with money from dubious sources, are also spending. They spend their wealth frivolously, easy when it’s not really theirs.
It’s a tough market if you’re selling, only those who really need to sell step out into the market given the current climate.
We have currently pulled in five contracts, and are looking at another four to come in shortly. We have nailed down the ones who really want to sell and why. One vendor has a gambling addiction and another has his eye on another home, and is on the verge of losing a large deposit; another has a serious family dispute, when it comes to family disputes money is not always at the forefront. These are the kind of vendors we like, those who actually need to sell and not those who are just dipping their toe in to see what the temperature is like.
We already closed a deal just days before Christmas for less than £700 per sq. ft. in a location where the price should have been closer to £1200 per sq. ft.
The first litmus test to see whether a property is a deal in and around central London is the price per sq. ft.
To put this in perspective the pounds per sq. ft. in Wembley is reaching £550- £650 for new builds. So, when you see a property in locations like W2 priced at less than £700 this needs to be looked into and fast.
This is not the be all and end all, the aspect of the property is also important, this can change the value completely. The stronger the location the more importance this commands.
The floor is important too, basements are generally much lower than the rest of the building, foreign buyers especially abhor basement properties.
Top floor apartments, which were former attics, need to be checked carefully as some parts of the room may have restricted heights; and therefore, should not command a consistent price per sq. ft. across the whole property.
There may be other factors, such as length of lease, which of course will influence the price. It’s simply a surface litmus test. But is a good place to start, and is used as the first indictor of whether a property is a deal or not. Especially useful in the case of large blocks where this is some consistency in regards to the individual properties.
The times we are in are rare, the last time there existed so much variability in the market was in 2007/8. Those who purchased then should be sitting on a comfortable asset base right now.
Call the office if you are interested in doing a deal.
Agony agent
After the success of Agony Agent last week, we have had a run of questions that need answering; I have picked a handful and will be answering a new question each week.
Mr Patel contacted me with this question:
Q: I’m thinking of renting to older tenants rather than targeting young professionals like everyone else. Good idea?
A: An excellent idea! The rental market is no longer just for young people yet to get on the property ladder. More and more mature professionals and retirees are turning to rentals, both from change of circumstances and as an active lifestyle choice.
Older tenants tend to have a more stable income, based on a lifetime of savings and investments, and are generally more interested in a long-term rental (and may well prove more responsible).
Around 25% of retirees live in rented accommodation, according to Prudential Insurance, as many sell their home to release the equity. And with an ageing population, these numbers are unlikely to go anywhere but up.
However, if you’re planning on taking advantage of this trend, here are a few things to keep in mind:
1. Pick the right area
Older tenants will probably want somewhere fairly quiet, but with particular services nearby. Long-distance travel links may not be so important but local buses and trains should be nearby. Security will be paramount, as will easy access to shops and, for the elderly, access to neighbors.
2. Buy the right property
Retirees will be concerned about staircases and room size. Is there space to convert a downstairs room into a bedroom if it becomes necessary? Could a stairlift be installed? Extra handrails installed? And would you allow these things?
3. Be reliable
Older tenants will have a particular desire for their landlord to be approachable and hands-on during their tenancy. They will be much less willing than younger tenants to put up with any discomfort or disruption that may occur during the tenancy. But look after them and they will be around for longer, making your life easier.
4. Maintain your property, properly
Older renters and parents are a more switched-on and savvy rental group. They will expect everything to be good quality and safe (and they should know what to check). They’re probably looking to settle down for a while so won’t be inclined take a risk on something they are unsure about. Make sure everything is in safe working order, inside and out.
If you have a burning question that needs answering, then please email me and if selected it will appear in next week’s article.
Richard Bond
Lettings Manager
