Aggressive bidding, with billions to invest
An insider’s view of the ‘superprime’ London market
Imust be embroiled in the longest flat purchase known to man. Having won a sealed bid in mid-February by going £151,000 over the asking price, paying a £15,000 non-refundable deposit, I still haven’t exchanged. I’m on red alert for fear of being gazumped, but hope to exchange any minute.
Back to the bigger picture and an overview of these past six months. The saga of Home Information Packs continues, the June 1 start date having been deferred to August 1 while yet further amendments were made (yawn), with HIPs now only applying to properties with four bedrooms or more.
Tony Blair has left No 10, Gordon Brown finally wears the crown. What will his premiership bring? Will it bring destabilising economic and fiscal change, so that flashing the cash becomes a thing of the past? Or the scrapping of non-domicility, which will turn our foreign friends away? I think not. Interest rates rose by 0.25 per cent to 5.5 per cent in May, then last week to 5.75 per cent; from a top-end point of view, nothing too alarming. But the bears in the City feel we will be at 6 per cent by Christmas. We at Lane Fox are in advanced discussions with Strutt & Parker to combine our two businesses. Lots of change is afoot.
In property terms, it has been an extraordinary time. In some cases, prices have risen by as much as 30 per cent. Chelsea Barracks has gone under the hammer for about £1 billion, to a Qatari-backed group. The Draycott Estate, Chelsea, is up for sale for around £50m. For the first time, I have felt London is in the grasp of a different type of buyer, a different type of money, a different type of sale. It’s not just City bonuses and oligarchs fuelling the staggering prices we have seen recently – it feels like we are in the grip of something else. The past six months has seen the emergence of property funds with billions to invest, which bid aggressively on anything they can lay their hands on. We’re on a carousel that seems unstoppable, yet we know it must and will stop. London is the place to live and the place to invest. Not just for us English, but for everyone else.
The international buyers are here in numbers that stun, a stark contrast to 10 years ago. They are predominantly European but there are growing numbers of Russians, Japanese, Chinese and Indians. Plus there are those from war-torn and fragmented Arab countries, heading here as their region becomes more insecure and volatile. Even the former prime minister of Thailand is here, buying Manchester City football club for £81m.
The family house market continues to outperform flats by a long way. Purchasers want substantial homes for the long term for their growing families and will do anything to secure space. They buy blocks of flats to convert into houses, happy to go through massive refurbishment programmes in order to get what they want in the style and standard they desire. For example, the Royal Entomological Society headquarters in Queen’s Gate, South Kensington, recently sold for more than £10m. The new owner plans to refurbish it and keep it as a house. Similarly, one of the last remaining seven-storey houses in Cornwall Gardens, South Kensington – with no garden and no lift – was sold to a Russian for £8.5m (£250,000 over the asking price) and a house in four flats in SW10 to a family for £7.5m.
The wave of money coming into the property market continues to apply great pressure to the tight supply line. Buyers are prepared to pay next year’s price this year in order to secure a piece of prime London. As a wise economist once said to me: “You never pay too much, you sometimes pay a little soon” – and this is the view buyers are taking. The future looks bright, with no black clouds ahead. But dinner party chat has started. “It can’t last forever”, is what everyone is saying. I disagree: my view is that we’re in for another storming year. I just hope I exchange on my flat before the market rises any further.
Lulu Egerton is a director of Lane Fox estate agents
A snip at £10 million: the former HQ of the Royal Entomological Society, SW7