The London prime property market is one of the world’s strangest, by anyone’s measure. Compared to the overall housing market in the UK, it represents just a handful of sales every year and yet it garners headlines and attention around the world from the Financial Times to the New York Times.
Its size is dwarfed by its reputation; according to an index released this week by property investment firm London Central Portfolio (LCP), just 3,558 homes were bought within the capital’s main prime central districts over the past 12 months.
At first glance the figures reveal a property market in trouble. Transactions are down by 15.6% year-on-year, 43% down from the most recent peak in 2013 and the number of new build sales, which make up 16% of the PCL market, are down by three quarters.
If applied nationally, or even London-wide, this would prompt speculation that the market is in freefall.
But prime central London is different – such few sales mean it only requires a minor shift in sentiment among buyers, developers and vendors to significantly depress supply and demand as well as asking prices in areas such as Knightsbridge, Mayfair, Kensington, Holland Park and Belgravia.
That is certainly the case at the moment. LCP says the average house price within this market is £1.809 million, a reduction of 2.4% compared to December and 5.4% year-on-year.
One person who is familiar with the challenges of London’s prime neighbourhoods is Marcus Bradbury Ross, who specialises in buying houses for HNWI within central London who are generally referred to him via either their London lawyers or bank.
He’s weathered at least three severe downturns in the London prime market since he began his career as a surveyor with Knight Frank in 1999, fresh out of Oxford Brookes University’s well-known Real Estate Management and Law course.
“Twenty years ago that gave you a path pretty much into any company you wanted join,” he says.
After five-and-a-half years at Knight Frank valuing ‘high-end resi’ and portfolio estates and completing his RICS qualification, he later moved to DTZ as an Associate Director.
“My job at that time was to value properties for the banks rather than the clients,” he says. “And ensure their borrower client was purchasing the property at the right price.”
His bread and butter then included townhouses in Knightsbridge as well as big houses in Mayfair and Belgravia.
“It was a fascinating time but what many people forget is that 2005 was a particularly bad year,” he says.
Then in 2010 Marcus valued a property at £7.15 million for a client bank but the buying agent involved, who is still active today but whom Marcus won’t name, recommended his Russian clients pay £9.2 million, which they did.
The owners spent £3 million doing the property up and it came back on to the market in 2017 and sold for £10.5 million, dramatically confirming his original valuation.
“This was the straw that broke the camel’s back for me, because I realised there was a market for a buying agent who could offer realistic and sound advice about, among other things, whether a property is suitable before it is all too late. That’s what spurred me on to become a buying agent.
“I also felt I could offer something which is a rarity in this field, which is professional, qualified advice via the correct due diligence to ensure clients are buying the right investment or home.”
Marcus says one of his main tasks is to prevent buyers purchasing properties in this market off-the-cuff and just because they like it, rather than thinking about its future saleability.
“It can be foolish to buy something whimsically just because you love it with your heart; it needs to make sense financially too and that’s the rigour that I apply,” he says. My mantra is to always buy the best you can with what you’ve got however wealthy you may be.”
“We all need to look at London in comparison with its competitors and there is only one other comparable city in Europe with a strong financial sector and a large, diverse population” – Marcus Bradbury Ross
One of the questions that DealMakerz was keen to put to Marcus is how can he value properties in London which have so few potential buyers and can seem so unique.
After a pause to think, Marcus says that valuing in London is easier just because of its size.
“For example, if you go to Eaton Square then there are five houses and all the rest are apartments, so you can look at the transactions and work out the range of per square foot prices and come to a reasonable estimate of value,” he says.
“But if you go out to the country then a four-bedroom house with two acres is very different to the two-bedroom cottage next door to it with half an acre.”
After working at DTZ Marcus then joined buying firm Prime Purchase. Then, in 2014, he founded his own HNWI property buying agent company, The London Resolution.
Like many agents who service HNWI clients in this market Marcus generally keeps his head under the radar. But on this occasion Marcus is keen to talk about his work, the extraordinary homes he deals in and the state of the market as it braves Brexit, increased Stamp Duty at the top end of the market and a downturn in investor activity.
“When clients mention Brexit, I have been saying to them that for the moment it’s ‘steady as she goes’,” he says.
“We all need to look at London in comparison with its competitors and there is only one other comparable city in Europe with a strong financial sector and a large, diverse population.
Marcus says Frankfurt and Lisbon have either the population or the finance sectors but not both, and that only Amsterdam worries him as a potential alternative to London post-Brexit.
“The basic reasons why people buy in this market are unlikely to change in the next ten years, even if London’s finance sector wanes,” he says.
“Like my most recent clients that includes people relocating with work, parent with children starting school in London, or people upgrading from pieds-a-terre to houses.
“But it is about location during downturns. For example, during the mid-1990s recession some roads in Hampstead did not suffer at all, while the financial crisis of 2008 halved prices in Eaton Square for some properties.
“One house there sold for £60-something million in early 2008 but it’s twin nearby sold for £33 million in late 2009.
“So I tend to tailor the answers I give my clients to where they are looking. You can’t just say ‘the London property market is doing this or that’ because different parts of London do different things at the same time.”
Which after all, isn’t that strange, even for London.