AFFLUENT buyers with millions to spend on homes at the top of the London market are becoming frustrated at the lack of suitable property for sale. Some have been househunting since the autumn, when news of bumper bonuses started to filter through City boardrooms.
Those who shared in the £7.5 billion bonus payout are competing with buyers from overseas, most notably Russia and the Middle East. All are in the running for homes that offer the ultimate luxury in London — lots of space.
“Confidence started coming out of the City as well as financial rewards at the latter part of last year,” says Jonathan Hewlett, of the estate agent Savills. “There is a lot more wealth sloshing about. The Forbes billionaires’ list used to include 400. But this year there are 793 in the billionaires’ club.”
Prices are being pushed up by buyers with individual bonuses of £1 million or more, although the average payout was £23,000, according to the Centre for Economics and Business Research. Figures from the property website Primelocation show that the average value of prime London property has risen 4.7 per cent in the past 12 months. The average price of a home in London’s best postcodes is now £940,000. In Central London it is now about £1.24 million after a 1 per cent rise this month and a 7.3 per cent increase over the year.
Properties in West and southwest London saw the biggest annual price rises (10 per cent), with homes in Islington, the City and Docklands close behind (9.7 per cent). Buying a place in Chiswick, Wimbledon and Richmond now costs an average of £870,000. Meanwhile, Islington, the City and Docklands continue to benefit from the “Olympic effect” — after a 1.3 per cent price rise on last month, homes there cost an average of £526,000. Throughout the capital demand is outstripping supply, with stock levels down by 16 per cent since last year. In prime Central London the number of houses for sale is down by almost a quarter to an all-time low.
Lulu Egerton, of Lane Fox, says: “In the 18 years our Cadogan Street office has been operating we’ve never witnessed such an acute shortage of supply. Buyers are completely committed to buying and are aggressively chasing the ‘good’ properties with sealed bids, non-refundable deposits and asking price offers becoming the norm. The volume of money available is far in excess of what we’ve seen before, coming from hedge fund windfalls, City bonuses and the likes of the Russians. We are beginning to sense from a handful of purchasers that they are finding the market too hot to touch and are deciding to sit it out.”
Agents attribute the lack of stock to several factors. Some say that sellers are waiting for prices to rise further before putting their homes on the market. Others believe that fear of not finding the right property to move to is deterring homeowners from coming to market in the first place. At the very top end, however, househunters are buying without selling. Some are keeping hold of their existing home while snapping up new properties. Hewlett says: “About 90 per cent of buyers looking for homes above £1.5 million are discretionary buyers. They do not need to sell to buy, they are not in a chain and do not need a mortgage.”
When homes with seven-figure price tags do come on the market, they are fiercely fought over and usually sold within weeks, often for more than the guide price. An increasing number of buyers are relying on buying agents who source properties before they appear on estate agents’ windows. Peter Mackie, of Property Vision, a firm of property buyers, says that so far this year more than 40 per cent of the value of transactions carried out on behalf of their clients have been private deals.
Bigger money is competing for even bigger homes, as space becomes the most wanted feature in a property. The wealthy used to settle for 8,000 square feet of property, but discerning buyers now demand trophy properties of 20,000 sq ft or more, with some accepting nothing less than 40,000 sq ft, more or less half a football pitch. The demand for space is such that a number of big houses in Central London that were previously divided into flats are being reconverted into single entities.
Peter Wetherell, managing director of Wetherell estate agents in Mayfair, says: “We have seen a complete step change in the £2 million to £3 million price bracket in Mayfair. In 2005 this was our quietest price bracket, but in 2006 it has been by far the busiest. We currently only have three properties on the market at this level.” Wetherell cites the example of one property that was on the market for £3.25 million with an agreed exchange date. The buyer overran the exchange date by 24 hours, by which time it had sold.
To coax reluctant sellers on to the market, the agent is introducing “hot” buyers to potential sellers on an “off the market basis” in the hope that homeowners will be persuaded to come to market.
Agents are urging sellers to take action while the market is active. There is a feeling that demand will ease off later in the year rather than the other way round. James Pace, of Farrar, the Kensington and Chelsea agents, says: “Purchasers will be turning to rental agreements if they are unable to find what they are looking for. A few months down the line, these buyers will be less inclined to pay a high price as they will be committed to a rental agreement and therefore feel less pressured to buy.”
Tim Wright, of Knight Frank, thinks that the market will start to flatten after the summer, by which time those with City bonuses to spend will either have found a home or have invested the money elsewhere. “City bonuses have been fuelling the market. But those who work in the financial sector know that this wave isn’t going to last for ever.”
SOLD
- Grade II house off a garden square in Central London attracted several bids and sold within weeks for the asking price of £3.25 million, even though it needs updating. There are few homes like this on the market.
- The buyer of a ground and lower ground floor maisonette in Chelsea exchanged within 24 hours of viewing and offered more than the guide price of £825,000.
- House in Oakley Street, Chelsea, trumped the record price on that street by half a million pounds, after selling for more than the £3.375 million guide price. It was under offer within a week of being put up for sale.
- Nine buyers bid for an unmodernised mews house on the Cadogan Estate in SW1. The price was £1.875 million but it sold for over £2 million with planning consent for demolition.
- The sale of a Victorian family house in North London was agreed only four days after it was advertised. The buyer offered the asking price of £2.75 million.
