Bargain Hunt Uncertainty gives rise to opportunity…
Last month this column drew inspiration from the long running BBC television show, Homes Under the Hammer, to explain how property related programmes have played an important role inspiring a generation of property investors and developers. In what may develop into a ‘TV inspired’ trend this latest article unashamedly steals its headline from another popular BBC show, Bargain Hunt! In February, Sonal Thakrar, partner and head of residential property at leading London law firm Mishcon de Reya stated that; “Brexit is creating huge uncertainty, but it’s also a fantastic chance for those who are savvy and brave enough to buy something to keep.” She was talking about a steady flow of high-end London property transactions that Mishcon are handling where buyers are securing very substantial discounts on the original asking price. Long before the term Brexit came into the public’s consciousness, the London market was disproportionately impacted by the stamp duty changes introduced by then Chancellor of the Exchequer, George Osborne in December 2014. He followed these up by introducing a raft of additional property taxes culminating, in early 2016, with an additional 3% levy on top of stamp duty charges for the purchase of second homes. In doing so he further compounded the downward momentum in Prime London house prices. Stretched affordability contributed further to this trend and means that today, despite over four years of falling prices, many properties in prime areas of London are still being heavily discounted before they are sold. Indeed, according to www.specialistfinanceintroducer.com
property data company LonRes, 56% of prime properties are being reduced before they find a buyer with an average discount of 11.5%. Of course, this average figure means that many prime properties are being discounted by much larger percentages. Whilst vendors that purchased prime property in 2014/15 are now often losing money the flipside is that many who have been renting in London for years and were previously unable to access the types of property that they wanted are finally seeing opportunities to buy a home. They have money, work in London, many are foreign nationals and they want to acquire a home here. The great ‘Bargain Hunt’ seems to be gathering pace and whatever the outcome of the last-minute Brexit negotiations this is a trend which seems likely to continue! If politicians in the UK and unelected bureaucrats in Brussels can finally find the morale courage to act in the national rather than their own self-interest, then a deal will be agreed, a significant degree of confidence will return to the market and prices could gradually start to rise. If they fail and Britain exits without a deal sterling will almost certainly weaken significantly, making London property look even cheaper to overseas investors, fuelling their demand and very possibly prices could gradually start to rise! From a London perspective it is a win, win scenario that has even prompted some estate agents to predict the bottom of the London market may just be reached in the next couple of months. For every purchaser that is put off by Brexit uncertainty it seems there is another who is being encouraged to look for a ‘steal’ and they are
Brian Strange Mike West managing director, Central director, Bridging Funding 365
anxious to close transactions before vendors have a chance to change their minds. Indeed, some cash purchases have even seen the return of ‘attended exchanges’ where the buyer’s and seller’s solicitors meet and exchange that day, before searches are returned. Anecdotally, at Central, we have seen a tremendous response to the launch of our new ‘jumbo’ loans from £5m to £50m in a single transaction. Crucially these are available with no maximum property value against both residential and commercial property. Ideally suited for both UK and Overseas investors, we have seen particularly strong interest from offshore companies and trusts for whom London never seems to lose its allure! The opportunity to secure a bargain is most definitely there for those brave enough to raise their head above the parapet and with an additional stamp duty levy for non-UK resident home-buyers currently under consultation by the government there is yet another incentive for overseas investors to move quickly. In closing, having been in decline for many years and at a point of maximum uncertainty surrounding Brexit, might London be about to once again demonstrate its legendary resilience in the face of adversity? It may be a little early to pronounce ‘green shoots’ but certainly there are some very encouraging signs. Whatever happens in the coming weeks there are well-funded bridging lenders, including ourselves, who stand ready to assist those for whom opportunity knocks… the Bargain Hunters!
MARCH 2019 BRIDGING INTRODUCER