Tag Archives: London

Local Plan

Land values languish amid Brexit uncertainty

By Vivienne Shirley, Senior Consultant

Land values slumped at the end of 2018 thanks to increasing build costs and economic uncertainty over Brexit, according to Knight Frank’s latest Residential Development Land Index.

The biggest decline was seen in prime central London, where land values fell a further 2.8%, taking the annual price decrease to 5.6% in 2018 – a drop of almost 20% since the market peaked in 2015. Brownfield land values also declined along with greenfield land value growth.

Patrick Gower, Associate at Knight Frank, suggested the hesitation of developers to purchase land is partly due to growing costs, noting: “Labour costs continue to edge up and the relatively weak pound has made imported building materials more costly for housebuilders.”

Hesitation and stagnation

The continuing economic uncertainty over Brexit is also weighing on home buyers and developers. In the resale market, the time taken from listing a home to sale agreed rose more than 30% since 2016 in the South East and London, as buyers bide their time. Sellers are also holding off in the weakened market, particularly in central London, with no sign the stagnation will end soon. At the same time, the greater risk of building in the current climate has prompted developers to increase their margins, suppressing land value prices.

David Fenton, UK Head of Regional Land at Knight Frank, commented: “Any business, be it manufacturing, housebuilding or professional services, needs clarity in order to inform their decision making process. Across the UK, businesses cannot plan for the short to medium term, therefore we have seen the housebuilders pricing in higher margins to address the unknown risks going forward.”

The hesitation felt by housebuilders is plain to see, with new build starts down 7% in the year to Q3 2018 in London, according to research by Centre for London. The number of approved planning applications declined for both major and minor schemes, which could see the slowdown in construction continue into the longer term.

Michael Hardware, Director of Planning and Property at Chelgate Local, noted: “The housing market continues to slow and shows no signs of abating while the Brexit chaos continues, with London particularly sensitive to the antics in Westminster.”

Who dares wins

However, for those developers with the appetite to take the plunge, there may be big profits to be had in the future by buying land now. In central London in particular, some major players have taken advantage of the weak sterling and drop in prices.

“The majority of central London developers are choosing to wait for greater economic certainty before purchasing land, however there have been notable exceptions in which investors have opted to buy while land values remain 17% below the 2015 peak, and sterling continues to trade at a discount relative to its value before the 2016 referendum,” Gower explained.

To misquote Spiderman, with great uncertainty comes great opportunity. Only time will tell if the gamble pays off – in the meantime, all we can do is urge politicians to get their act together and avoid a Brexit apocalypse.

super-prime market

Pent-up demand for penthouses?

By Vivienne Shirley, Senior Consultant

The super-prime market is rarely affected by the vagaries of the general housing market, but it is a very good guide to confidence in the economy – if rich people are investing in London, they obviously think the UK has a prosperous future.

With this in mind, many will be relieved by new research revealing sales of “super-prime” multi-million pound properties in London have remained remarkably resilient. Despite ongoing fears of a no-deal Brexit leading to financial disaster for the country, overseas investors are reported to have splurged over £400m on four super-prime central London properties in the last couple of months alone.

Knight Frank’s latest super-prime market insight report shows the number of super-prime transactions was marginally down on the previous year, from 133 to 121, though the total sales value was up 22% on 2017 and 23% on 2016. The report suggests this could be due to the instability of the general election and Brexit referendum respectively in those years. The number of prospective buyers has also increased, though prices have declined to more than make up for the higher rates of stamp duty introduced by Osborne in December 2018.

West is best

Sales have been most resilient in areas such as Notting Hill and Chelsea which attract more needs-based buyers – British-based buyers who will remain in the UK regardless of Brexit. These areas are also boosted by the greater availability of wider-layouts in homes, which are generally preferred by purchasers. Research by Coutts also agrees ‘west is best’, with the only areas showing positive annual growth in prime property prices Chelsea, Kensington, Notting Hill & Holland Park, St John’s Wood, and Regent’s Park & Primrose Hill.

Both reports suggest potential buyers are holding off until a sensible Brexit agreement is in sight and will then pounce as Rory Penn, Head of Private Office at Knight Frank, explains: “Viewing levels remain high and a number of buyers have been scrutinising the market over a long period of time…

“Once there is a feeling that a sensible Brexit deal has been reached and speculation over the future of the government dies down, I believe there is a certain amount of pent-up demand that will be released.”

Caution in the London market

The caution seen in the super-prime market reflects the rest of London’s housing market, with figures from the Office for National Statistics showing the average cost of a home across the capital slipped by 0.3 per cent to £482,000 in the year to September. Flats have been hardest hit, with the average apartment costing almost £16,000 less than in July 2017.

Jonathan Samuels, chief executive of property lender Octane Capital, noted: “London continues to be the weak link in the UK’s property market… As one of the world’s foremost financial hubs, the capital is highly exposed to the fall-out from Brexit.”

What’s next?

Buyers and sellers will be anxiously watching the result of the Brexit parliamentary vote in the next few weeks and as far as the market’s concerned, the sooner a sensible Brexit deal (or exit from Brexit) is reached the better.

Mohammad Syed, Head of Asset Management at Coutts, concluded, “The end of Brexit uncertainty – when it arrives – is likely to release some pent-up demand and see a rise in market activity and prices. But we believe that it will be some time before transaction volumes return to the levels seen in 2013.”