9th September 2017
We ended up completing on a deal in Hatherley Grove W2 on the 1st September. The hope was to flip the property prior to completion. The strategy was to apply for planning permission for another 430 sq. ft., in addition to the existing 700 sq. ft. of space, by way of a mansard on the top of the building.
We had managed to negotiate a long four months between exchange and completion; and attempts were made for a resell, both off market and by way of an auction. The property didn’t sell, in part due to the poor market, especially in the auctions rooms, and in part due to the existing residents trying to scupper the sale; they figured out a flip was being attempted and perhaps didn’t like the idea of someone profiting from a block they lived in.
Some objections were filed with the auctioneer and the council. One of their objections was that we did not own the area for which we were applying for planning. This is obvious, and it’s not a requirement to own the space before submitting a planning application. A planning objection can only be filed on a planning basis, not on any other.
Truth be told, we were hoping to resell this property, as the time and hassle factor involved in the negotiations could be better spent elsewhere. However, now that our client has ownership we will need to grab the bull by the horns, and ensure we are able to implement the planning; assuming it is of course granted. The chances are very strong as the majority of the street all have mansards.
The property is very nice, and a great deal even as it is. It’s a share of freehold, and the purchase price was £1,000 per sq. ft. A tenant has already been found for the property, at £500pw, giving a yield of 3.7% p.a., which is a strong yield in W2. We have another plan, if for some reason we are not able to implement the planning permission for the mansard, which is to convert it from an existing two bedroom flat to a three bed – two bathroom property; without the need for planning. This is our default position.
This area around Queensway is earmarked for massive growth in the coming years. A Knight Frank report in 2014, focusing exclusively on W2, highlights this is a growth area to watch out for; and this is where the smart money will be going. Of course, this was prior to the Stamp Duty rises and the Brexit vote. Nonetheless, once the dust settles, the fundamentals will override the temporary market conditions. The report focuses on the area between Westbourne Grove and Hyde Park, it points out there was planning permission for 239 new units in this locality, and at the time only 137 were under construction. Bear in mind these are not new units coming on the market; they are ALL conversions, the external of the buildings are kept intact and the internals are worked on. Looking at it from this perspective, it can be argued no new stock will be coming on to the market. Given this, there is little risk of oversupply.
The demand side is driven upwards by the regeneration which is due to occur in the area. A wealthy far eastern buyer has purchased Whitley’s Shopping Centre as part of a wider regeneration plan.
In property, it important to stay flexible and be able to adapt to the changing market conditions; as there are things you can control, and things you cannot.
Suresh Vagjiani
