This guest post is by Alan Page of Beachcomber Page, a luxury SME developer working in the SW London market. Alan generously gives us his take on the PCL and “Middle Class Prime” London property markets.
No longer Prime Time?
London’s once seemingly unstoppable top-end residential market booms no more. Prime is in decline and today’s quiet market echoes only to the sound of sellers whingeing and agents whimpering.
Figures suggest the prime central market peaked in late 2014 and has since dropped by around 15%. That’s a chunky hit on properties of £2m+.
I should know. It took me over 12 months and several price drops to sell our Kensington doer-upper. We’d expected to get £2.75-£2.8m. And to sell it within a few weeks. We got £2.5m. Eventually.
Fortunately, we’d bought well and still made reasonable money. But it was a very slow ‘turn’ on our cash. And things look as though they’ll get worse before they get better.
There are a number of reasons the so-called experts give for this slump – higher SDLT rates, political uncertainty, currency fluctuations (especially the Rouble’s precipitous fall), China’s slowdown, Euro turmoil, oil prices – but it could be that seller expectations had simply climbed too far.
When flats at One Hyde Park are asking over £6000 per square foot, and even rather dull little bolt holes in Knightsbridge are pushing for £3000 per square foot, it’s just possible that buyers got cold feet and walked away.
You can’t blame them really.
So what now? Will the market actually crash? Or will it continue its gentle decline until interest is rekindled by a return to good value?
I don’t think anyone knows the answer to that.
What I do know, however, is that people still need a home, still need to move occasionally to accommodate a growing family or to downsize when the nest eventually empties or they need to raise cash for whatever reason.
These people won’t be looking to move into Prime Central London. They’ll be searching the areas where real people live.
Middle Class Prime, I call these areas. In my part of London that means places like Earlsfield, Wimbledon (parts of), Putney, Barnes, Sheen, Kew, Mortlake. (A few years ago they’d have been looking in Fulham or Wandsworth, but these are now out of their league.)
This is where, for example, a young city lawyer moving up to junior partner level and starting a family will make their first real home. They’ll sell the one or two bedroom flat the bank of mum and dad helped them buy in Fulham or Clapham and look for their first house. It will need a minimum of 3 bedrooms and a garden of some sort for little Jasper or Jemima to play in.
They won’t mind doing a bit of redecoration or replacing a tired kitchen, but they’d probably prefer not to completely remodel the house. That’s too much disruption when you’re already coping with the twin stresses of new babies and a competitive career.
The problem is that most developers have built hundreds, if not thousands, of 1 and 2 bed flats in characterless blocks. And when a thirty something grows up and starts ‘nesting’ they don’t want a flat. They’re British, and as we all know, the Brits don’t really ‘do’ flats. The middle classes also don’t ‘do’ new houses.
So it doesn’t matter how much green belt or riverside gets ploughed up for dreadful, new, developer homes….the people who can afford £1.5m won’t want them.
They’ll still be looking for the standard old terraced house where they can put up plantation shutters just like everyone else in the street, park their VW Golf outside and nip down the road to a nearby Waitrose.
Already, agents tell me, there’s a massive over-supply of new build 1 and 2 bed flats in SW London and all the way along the river. And a shortage of ‘affordable’ conventional family homes.
So, trust me, the place to stick some money is in good old fashioned family-size terraced houses.
Or a stake in a plantation shutter company.
Zuhair Mirza, Principal: “We are very grateful to Alan for sharing his thoughts on the SW London residential market and look forward to funding his projects when he decides to take the next one on.
We share Alan’s view that demand for “Middle Class Prime” will remain strong because these are places that people will continue to want to live in and compared to more prime areas are still (relatively) affordable in terms of quantum and £ per sq ft.
We are exceptionally happy to support experienced “doer-uppers” such as Alan for projects in Middle Class Prime where the finished values are below £1.5m per individual unit. Notwithstanding that, whilst we see a correction taking place in Prime Central London, we are still happy to lend in prime locations against sensible LTV and valuations; and welcome applications from brokers and borrowers for these opportunities.
We also agree with Alan’s advice on investing in planation shutter companies…”
Notes to Editors
ALAN PAGE is an ex-advertising creative director turned property investor/renovator. He has completed various projects in Prime Central London as well as several in St Tropez and Paris.
He is currently working on a house in rural Somerset, contributing to PrimeResi.com via his blog The Doer-Upper Diary and looking for his next project in London.
Next month he will launch a new website padproperty.co.uk.
You can also follow him on Twitter @beachcomberpage and Instagram at alanjpage.