Tuesday, 27 May 2014

The Search for a Margin: Mission Impossible?

Bargain Terrace, Opportunity Avenue and Doer-Upper Gardens. As far as I can see, these are the lost streets of London.

We have money sitting unprofitably in bank accounts. There are people who would happily help finance the right project.

We have trusted project managers, builders and all the other people required to turn a renovation round efficiently.

What we don't have are the opportunities.

Prime Central London and its bordering boroughs seem bereft of value.

Doer-uppers are going to best and final bids and achieving done-up prices. There's simply no margin for the likes of me.

It's a worry for me, of course. But it's also a potential disaster for the whole market.

If someone pays the done-up price for a doer-upper, they are basically assuming that property values will continue to climb.

They are gambling that the money they invest on top of an already excessive purchase price will soon be recouped by ever spiralling values.

I wouldn't be so sure.

The market up to £2m seems hugely over-heated. UK incomes simply aren't growing quickly enough to support today's prices let alone further big rises. And although the supply of cash-rich foreigners may still be strong, many prefer new-builds to tarted up old-stock.

Lets take Fulham as a near-Prime example of where prices are out of sync with reality*.

This area's role historically has been as feeder to Prime Central or to family-oriented areas such as Wandsworth's Nappy Valley. Young, aspirant, newly qualified professionals would buy their first homes in Fulham, or house share with friends from Uni. Now it's rapidly becoming as expensive as the better parts of Notting Hill. Horrible little houses needing renovation are going for the best part of £2m in roads most of us wouldn't have been seen dead in a few years ago. And a house in a perfectly unexceptional road near Stamford Bridge is on the market at an astonishing £3.5m.

I just don't see where the money will come from to justify further hefty rises. How many young people can afford £2m for a house?

Then there's Battersea, an area that might define the term 'mixed'. Close by the faux-smart Prince of Wales Drive, for example, there are housing estates that taxi drivers refuse to enter and police only venture into mob-handed. Yet the so-called middle-classes are pouring cash into the area like it's the new Belgravia, and overseas buyers are snapping up off-plan flats in that desert of any area around the Power Station. Yuk!

Others talk of Vauxhall as a sort of nascent Notting Hill. Have they ever been to Vauxhall, I wonder? Somehow I doubt it.

Even in areas such as Streatham and Brixton friends tell me the market is just as frenzied, with very ordinary flats attracting multiple bids over the asking price. (And those are asking prices that would have seemed absurd only a year or so ago.)

In Clapham extremely dull areas such as Abbeville Road have become hotspots just because (it seems to me) they've opened an over-priced, trendy new butcher on the street. I'd rather shoot myself than live in the anonymous streets around this area's 200 yard long oasis of uppish-market shops and restaurants.

More importantly, I just cannot see who will have the income to justify mortgages of over £1m to buy into the area. Especially once interest rates start climbing again.

Putney perhaps offers a few opportunities but the downsides include Nick Clegg as a resident and the appalling "poundlandesque' high street.

The house I sold on East Putney's Upper Richmond Road a few years ago has just gone back on the market at almost double our sale price, and six or seven times the price I originally paid. (And, by the way, it looks worse now than when I moved out!)

Wandsworth is basically already done-up and yet prices still keep going up. There's hardly a side-return, damp basement or mansard extension left to develop in the whole area. And if I see another set of Elephant's Breath painted plantation shutters I'll throw a brick through the window.

Back north of the river, West Kensington (or Baron's Court to the rest of us) seems to have discarded its itinerant residents as more and more people realise how close it is to Kensington proper. I paid under £20k for my first flat at Queen's Club Gardens. I'd need £500k+ for the same tiny top floor bolt hole now....and it still has no lift.

Now, I'm not the sort of publicity-seeking property commentator who drops the word 'bubble' at the first sign of a few homes being sold but even I think things are getting out of hand.

I've lived in London for 40 years, and owned a variety of properties across numerous parts of SW London. But I now feel priced out of the market both as a small-time developer and, more importantly, as a resident.

I reckon I'd need to be earning (at the age of 35) at least £300k a year to live the way I did in the 1980s, and afford the property we bought back then. (Especially if interest rates today were as high as they were then.)

About the only place I can afford to buy now is Pauper Place. Wherever that is.

* Fulham asking prices are apparently up 18% year on year. And you still think I'm being OTT?

Wednesday, 7 May 2014

£10,000 a square foot? Sounds reasonable to me.

A flat at One Hyde Park has apparently sold for around £140m, a price equal to about £10,000 per square foot.

It seems insane. But is it?

After all, it's almost certainly a very, very nice apartment. (The Candy brothers have an unerring eye for spaces that suit the aspirations of the super-rich, and there aren't many buildings by the legendary Lord Rogers that you can actually buy a flat in.)

It's slap bang in the middle of what is arguably the world's most desirable place to own a property. (Disregard those cynics who say the building overlooks a noisy road junction.)

And, of course, it's really not so crazy when you consider how much an Oligarch or Sheik will happily shell out for a yacht that starts losing value the moment it hits the water.

No, in a mad, mad world it's not such a daft price.

Of course for the likes of you and I (assuming my readership demographics haven't taken a dramatic upward swing) it's still absolutely bonkers. But so is spending £1m or so on a Bugatti Veyron, or £100m on a Francis Bacon triptych.

It's silly money. Like a kind of super-sized game of Monopoly

A few minutes along the road from the billionaire housing estate known as One Hyde Park, we are in the midst of renovating (more accurately, rebuilding) a sweet little cottage in a charming road off Kensington High Street.

By any normal standards Abingdon Road is also expensive. Current asking prices on the street are in excess of £2000 per square foot. Which is at the very top-end of Prime Central prices.

As the eagle eyed mathematicians among you will have noticed, however, this is dirt cheap compared to a 12"x12" patch of Candy coated construction.

So why the vast differential? Why is one worth FIVE TIMES as much as the other?

Buggered if I know.

Houses on Abingdon do of course lack several features that come as standard at One Hyde Park.

There are no smartly dressed, headset-equipped ex-SAS squaddies holding open the door for you. The Mandarin Oriental does not offer room service. There is no underground car park in which to store your fleet of blacked out limos. Harvey Nichols make-up department is not just across the road. And it's a bit of a slog to the nearest McLaren car dealership.

These disadvantages aside, though, Abingdon Road's not such a bad place to live.

Even though many of the houses are now worth a great deal of money (by the standards of us mere mortals), it still feels like London. It was built on a human scale. It has a sense of community. It's pretty. It's got two very good local restaurants (Kitchen W8 and The Abingdon). Waitrose is round the corner. Holland Park is across the road.

And at £2000 a square foot it's clearly a bit of a steal.

Perhaps with a bit of branding work, some canny international marketing and a few top-end connections into the Middle East and Eastern European elites we could raise this street's desirability levels.

It has to be worth the effort. After all, at £10,000 a square foot our little house would be valued at around £15m.

I'll take that.