Few would argue that this has been the toughest year in the London property market since the financial crisis of 2008. The swirling – and drearily continuing – uncertainty around Brexit has slowed transactions and, while a revival of activity at the top of the market is hopefully a harbinger of recovery, it remains a case of ‘wait and see’ for many buyers.
However, Black Brick has reported that they advised on 43% more transactions in 2018-19 than over 2017-18, despite the general gloom.
“People realise that uncertainty in the market creates opportunity, but it also encourages people to seek advice,” says, Camilla Dell, Black Brick Managing Partner. “Also, the lack of supply of good quality properties places a premium on advisors such as us, who have a good network of contacts and who get to hear about properties early.”
The report outlines some key trends including the rise of investors buying up whole blocks or multiple freehold properties, this is due to there being a considerable tax advantage amongst other reasons. A purchase of six or more properties qualifies as a commercial investment, and therefore incurs Stamp Duty at a flat rate of 5%. An equivalent investment – say of £6 million – spread across six £1 million properties would incur an effective rate of 7.38%, while this would rise to 9.25% if a buyer purchased four £1.5 million properties.
“For a substantial investment, it’s important to get good advice,” says Dell. “We would recommend blocks that are close to transport links, are made up of smaller units, as these are more liquid and easier to rent, and are preferably located in areas that promise future capital growth.
“In this regard, W2 is attractive, says Dell, given that it is undervalued compared with neighbouring Mayfair and Notting Hill, and is also benefitting from considerable investment, such as in the regeneration of Queensway.
“We’re also looking on behalf of clients at blocks outside prime central London, such as in Stratford and Twickenham,” Dell adds. “They can offer yields above 5%, which compares favourably with the 3-3.5% available in central London.”
Additionally, the company has been buying properties across a wider range of postcodes in the last 12 months with buyer demographics relatively stable. There was a slight tick-up in the percentage of UK-based clients, from 26% to 30%, while Middle Eastern clients fell back slightly. The big difference was in interest from the US: from zero in 2017-18, they made up more than one in seven of our clients in 2018-19.
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