Market Update – February 2017
Please see below our observations on the market so far and our predictions for the year ahead.
Transaction of the month: Client who started their search looking for a lateral flat and ended up buying a family house
We were retained by clients who were renting and engaged our services to find them an almost exact replica of where they were living. Within less than two weeks we had found them the perfect solution.
Having presented the option to our clients, they decided on reflection that a family house would be a more sensible long term purchase. We therefore went back to the drawing board and advised them on suitable locations within budget.
51 viewings and three months later, we secured a superb house which had been under offer with an unreliable buyer. We had the opportunity to take over the purchase by offering the vendor flexibility to accommodate their time scales and continue with their onward purchase.
Throughout the purchase we gave our clients key advice on pricing, location and schools to give them the reassurance to proceed. We are now working with our client to help them select a suitable interior designer to tailor the home to their specifications.
Rise in off market sales and lack of clarity on pricing
We have seen a noticeable rise in off market sales over the past four months. Many vendors do not want initially to take the risk of openly marketing, for fear of later tainting the property if it fails to sell. Therefore we have seen a significant number of properties for sale which are not openly visible on the property websites.
A lack of clarity on pricing is another reason buyers are turning to professional representation for their purchases. Most of our current and recent buying clients have cited pricing advice as one of the key reasons for retaining our services. There are lots of headline ‘discounts’ which are often misleading and in many cases don’t represent a genuine discount. Having industry-only available price per square foot knowledge and data are now more important than ever to avoid overpaying in this market.
Negotiation opportunities in the rental market
London rental prices in the £300-£800 p/w range have remained broadly flat or softened by approximately 5-6% over the past 12-18 months. This has largely been driven by an increase in supply and a tenant focus on value for money. There is increasing pressure on landlords to keep their properties maintained to high standards and looking as good as possible.
The higher end of the market has seen more activity and prices holding firm. This is especially evident in the > £2,000 p/w level where would-be-buyers are active. This increased demand has been met with supply of superb properties which would otherwise have been put onto the sales market, but owners and developers have opted to rent out for the next three years instead. At this end of the market, corporate tenants are still in force at the senior executive level and budgets are just as generous as they have always been.
Rental yields still remain relatively low (approx. 2% gross in prime areas and approx. 4.5% gross in higher yielding ‘up and coming’ areas). Most landlords are still focusing on long term capital growth prospects, rather than yield.
Tax changes relating to offsetting mortgage interest payments will begin to be phased in this year. We don’t think the reduction in net rental income at this early stage will be enough to see a wave of landlords selling.
If you would like to subscribe to our monthly market updates please email: Leila.AbuSharr@SourcingProperty.co.uk