Buyers are seeking out dilapidated properties in London, according to award winning buying agency, Black Brick. The new trend comes as buyers look to find the best possible deal on their London home, enabling them to achieve better value for money and improved potential to achieve long term capital growth.
The buying agency has reported that wealthy individuals are currently reluctant to pay £4,000 to £5,000 per sq. ft. on a new luxurious property in prime central London and are instead purchasing distressed apartments and houses which can be renovated, minimising risk and increasing their value.
Camilla Dell, managing partner at Black Brick said, “We are seeing an increase in properties coming onto the market which are being sold because a family member has passed away or that have been in a family for 20 to 30-years and handed down to the next generation.
“Although it is a buyers’ market at present, these properties have still gone up in value considerably since they were purchased many years ago and therefore sellers are willing to take a deal or reduced rate on their home.
“As well as down-sizers presenting good buying opportunities, we are also seeing opportunities to get good deals where properties are owned in a company structure, and as such have been paying ATED charges (annual tax on enveloped dwellings) – that’s the annual charge companies that own properties have to pay each year if the property isn’t rented out.
“The charges are significant. For a property worth between £2m and £5m it’s almost £25,000 a year and for a property worth £5m to £10m it rises to almost £57,000 a year. That’s a lot of outgoing in addition to mortgage costs and service charges, and for some owners the costs just don’t make sense anymore, particularly if they are not using the property much and their own financial situation has changed.
“That’s why as buying agents we always seek to understand who the seller is and why they are selling. It can tell us a lot about how motivated they are and how hard we can negotiate on price.
“We recently sourced a property in Marylebone for a client which was for sale at £1,200 per sq. ft., the buyer needed to spend £300 per sq. ft. renovating it, however, when it is complete it will be worth upwards of £1,800 per sq. ft., making it a great deal when compared to new builds in the area which can sell for closer to £3000 per sq. foot.
“We are also seeing some great discounts being applied to new build properties which are due to complete in the next two or three months and the seller is wishing to flip it before completion. Some are even willing to take a significant loss in order to not complete on the property and face having to pay stamp duty.
“We are advising buyers that if the right deal can be sourced, now is a great time to be buying, but realistically given the costs of acquisition, investors need to be looking at holding onto to the property for a minimum of five to 10-years before they see significant growth in its capital value.”