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BLOOD ON THE STREET

4th February 2017

I was sitting down with an agent last week, whom we’ve done business with previously.  He was filling me in with what’s happening on the street.  His office tied up approximately £300k of fees in the month of December.  Good going considering this is supposed to be the quietest time of the year in property.

Deals are being done, ones which are way below the asking price.  He rattled off several, one which was £1.5m off the £6m asking price.  I recalled having seen one of the ones he mentioned several months ago, a large lump in Bryanston Square.  We were avoiding large pieces at the time, having already been stuck with some we were trying to sell.

The frenzy to purchase has been caused by the soft pound and the current geopolitical uncertainty.  Frenzy can cause strange things to happen.  Several properties which are overpriced sometimes managed to get sold.  For example, properties have gone for £1,200 per sq. ft. in blocks where we had purchased for £730 a sq. ft.

Lots of money is coming from overseas, the Arabs are buying, as well as many politically connected people, flush with money from dubious sources, are also spending.  They spend their wealth frivolously, easy when it’s not really theirs.

It’s a tough market if you’re selling, only those who really need to sell step out into the market given the current climate.

We have currently pulled in five contracts, and are looking at another four to come in shortly.  We have nailed down the ones who really want to sell and why.  One vendor has a gambling addiction and another has his eye on another home, and is on the verge of losing a large deposit; another has a serious family dispute, when it comes to family disputes money is not always at the forefront.  These are the kind of vendors we like, those who actually need to sell and not those who are just dipping their toe in to see what the temperature is like.

We already closed a deal just days before Christmas for less than £700 per sq. ft. in a location where the price should have been closer to £1200 per sq. ft.

The first litmus test to see whether a property is a deal in and around central London is the price per sq. ft.

To put this in perspective the pounds per sq. ft. in Wembley is reaching £550- £650 for new builds.  So, when you see a property in locations like W2 priced at less than £700 this needs to be looked into and fast.

This is not the be all and end all, the aspect of the property is also important, this can change the value completely.  The stronger the location the more importance this commands.

The floor is important too, basements are generally much lower than the rest of the building, foreign buyers especially abhor basement properties.

Top floor apartments, which were former attics, need to be checked carefully as some parts of the room may have restricted heights; and therefore, should not command a consistent price per sq. ft. across the whole property.

There may be other factors, such as length of lease, which of course will influence the price.  It’s simply a surface litmus test.  But is a good place to start, and is used as the first indictor of whether a property is a deal or not.  Especially useful in the case of large blocks where this is some consistency in regards to the individual properties.

The times we are in are rare, the last time there existed so much variability in the market was in 2007/8.  Those who purchased then should be sitting on a comfortable asset base right now.

Call the office if you are interested in doing a deal.

Suresh Vagjiani

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