PCL Perspective: Achieving sales in the current climate

In today's market, transactions succeed due to expertise, connectivity and the drive to outperform for clients, says Thomas van Straubenzee

A core of buyer appetite for good stock exists in Prime Central London, but there is no longer any room for over-inflated prices or generic mass marketing, says Thomas van Straubenzee

There has been plenty in the media recently about the decline of the Prime Central London market, but, while it is true that transaction levels are down, they are not as low as the media would lead us to believe – nor is the outlook as bleak.

It is important to remember that, over the past ten years, London has benefited from significant capital growth in the residential markets, at a rate that was ultimately unsustainable in the long term. Savills research shows that values in ‘Inner London’ increased 98% in the 10 years to December 2016, and so it was inevitable that we would eventually see a slowdown – particularly at the top end of the market. In the end, this has been mainly caused by stamp duty increases and other property tax reforms that have been introduced, to which we can attribute part of the 12.5% decline in residential values since September 2014. Properties over £10m have been most affected by these hikes, falling 15.5% since their 2014 peak, followed by the £5m to £10m bracket, which has decreased by 13.6%.

These tax changes have had a clear impact on the market but, in reality, it is the shift in sentiment that has been Prime Central London’s biggest enemy with regards to values and liquidity. A number of factors have fed into this, including: Uncertainty around Brexit (and the resulting volatility of Sterling); concerns around unemployment in financial services; nervousness around high asking prices (following the high levels of growth mentioned above) and an oversupply of stock (particularly multi-unit new-builds). We have certainly experienced hesitation from clients, who could easily afford the higher stamp duty, but nevertheless felt affronted by the fiscal changes.

We have certainly experienced hesitation from clients, who could easily afford the higher stamp duty, but nevertheless felt affronted by the fiscal changes

While sentiment is weaker than in 2014, 2015 and early 2016, there remains an active market in Prime Central London. Admittedly supply levels – and therefore competition – are high, but a core of buyer appetite for ‘good stock’ exists. We have seen demand for the best properties on our books and, last year, we achieved three residential sales of c.£50m, including one of the largest transactions recorded in Kensington. This year started quietly, but there has been a significant pick up of client activity in the last few weeks and we agreed four transactions at the beginning of March 2017 alone. It may be hard to sell 100 identical units for the optimal price, but one-off quality properties do, and will continue to, attract interest – usually from more than one party.

We believe that the key to generating interest and sales is predominantly down to proactive marketing to the right people. There is no room in the market for over-inflated prices or generic mass marketing. In today’s climate, VanHan’s clients want a more bespoke and targeted sales approach. The best properties are off-market and it is no longer enough for agents to rely on marketing material and online advertising. Transactions succeed due to expertise, connectivity and the drive to outperform for clients.

The best properties are off-market

There has been a softening of the Prime Central London market, but we do not envisage this continuing in perpetuity. We believe that prices will remain at similar levels throughout 2017 and 2018, before picking up again in 2019. Concerns around Brexit, the strength of the pound and increased property taxes will continue to be issues for some buyers, but ultimately London remains an eminently desirable place to live, work and invest. We expect we shall continue to see good levels of demand.

Thomas van Straubenzee is Managing Director at VanHan

vanhan.co.uk