Kensington and Chelsea property market update

The question around some of the duller dinner parties across London is still “what’s happening to London property prices?” Nothing new about that, at least. Only the answers aren’t quite what people were hearing a year ago.

The London lettings market has seen little change with the number of properties let, and new deals agreed, on par with forecasts. Slower city recruitment and net job losses are having some effect at mid and upper price levels for larger properties. This is off-set by a gentle gravitation from buying to renting (as people adopt a wait and see approach) for smaller, more affordable flats. Whilst there’s more stock of larger property, smaller flats to let in Kensington and Chelsea are being snapped up like hot cakes. It’s uncertainty in the sales market that is the major issue.

Property forms a substantial proportion of investment capital for most of us. It’s the “must have” investment that we are all familiar with. It’s tangible; you can see it and touch it – you can even live in it. So what’s different today in the South Kensington and Chelsea property market compared to six months ago?

The mad scramble to buy at all costs is over. Buyers now have more choice; instructions are up 73% across our offices. We’re back to a more considered market with more property available to sell, and buyers who are being properly pre-qualified by lenders before buying. Developers are still buying, albeit more cautiously, as are buy to let investors (particularly smaller one and two bedroom flats where yields are improving). There certainly isn’t blood on the carpet, despite what the press would have us believe - in Central London, at least.

Prices have eased - estate agent-speak for the f- word. I’ll defy convention and use it. Fallen. There. It wasn’t so difficult to say after all. If you bought in October 2007 there’s a strong possibility that your property will sell today for a little less than you paid. Perhaps as much as 10% less.

In the last couple of years there hasn’t been enough property coming on to the market in the “Resident” area where Chard’s South Kensington & Chelsea sales and lettings offices operate. London is a crowded, popular city. People want to do business here and a booming financial services industry (handing out billions at a time in bonuses) has ensured that demand remained high, stratospherically so in some areas of the Royal Borough. These people have to live somewhere and a third world train service and congested roads deter all but the most committed from moving out of town and commuting in each day.

There’s been a stealthy “drip-feed cull” in the City since the New Year. Some estimates put it at around 10% of the senior workforce, although banks appear to have kept their heads well down in making it too public. This has, not surprisingly, dampened confidence. We have around 40% fewer people looking to buy than a year ago, and they have more choice.

It’s widely known that lenders are getting picky, although personally I see it a reassuring sign that lenders are pre-qualifying borrowers more vigorously than before. The Kensington and Chelsea property market is not as dependant on cheap easy credit as the rest of the UK. It operates in its own “micro-market” fuelled by international money and the pre-eminence of London as a global financial centre. In any case, sensible lending is essential in maintaining long term confidence if we are to avoid the “house of cards” situation in the US where in one state, Nevada, 1 in every 54 properties is now in foreclosure.

Two family houses in Kensington for sale at around the £10,000,000 mark sold through our Kensington office in the last couple of weeks reassure me that New Labour’s “non-dom” tax spoiler hasn’t yet scared off all the high net worth, non-domiciled residents essential to London’s economic prosperity – but it certainly hasn’t helped.

Like most other estate agents in London we see HIPs as a total waste of time and money. Results speak louder than rhetoric, and in common with another Kensington estate agent recently on record, we too have only ever had three applicants ever ask to see them, very likely the same three! The introduction of the Energy Performance Certificate to lettings from October 2008 is unlikely to be any more useful to tenants, simply another cost to landlords that will inevitably be passed along the food chain. So much for the government working to maintain confidence in the UK property market.

Sales are being agreed, albeit at a slower rate than a year ago, although there are still plenty of offers flying around. Encouragingly, fall-outs are down by at least 10%. Buyers and vendors are more serious. Vendors, in particular, are realising (some quicker than others) that there’s a new reality in the market.

So despite government interference (both in the buying process as well as on a macro level), a worldwide credit crunch, news media desperate for “property crash” headlines and a cull of city workers – all of this has combined since Autumn 2007 to cause nothing more than a minor correction. The London property market is still remarkably, incredibly, strong. And looks set to remain so.

Buyers are very unlikely to make a quick buck buying and selling right now. On the other hand, the market has already been re-appraised and there’s more choice of flats and houses for sale in London than we’ve seen in years. If you’re looking to buy as a long term investment or as a genuine home, now may just be an opportune moment to do so.