The Centre of Gravity

11th December 2020

There are a couple of deals close to Marble Arch which are in the hands of the receiver.  The properties consist of two bedrooms and, surprisingly, three bathrooms.  They have been finished to an extremely high standard.  I would estimate the costs would have been around £60K each.  The woodwork is all hardwood and bespoke to the rooms, even the beds have been custom made.

It is unfortunate for the seller that this is a receivership sale.  The price for both properties is now under £1.4M, approximately £700K a piece.  The comparables show a discount of close to a third, which is huge given the location.

The more central the location the harder it is to secure any discount, let alone almost a 1/3 off the retail price.  Our office premises used to be across the road, on the 10th floor, on Bryanston St, until they were knocked down for a residential newbuild; this is a locality we know extremely well.

Prices across the road run at about £4,500 per sq. ft.  This equates to £3.7M; and it is literally 20 seconds across the road.

The product of course is vastly different.  The newbuild has “COVID proof” air purifiers, and will come with a spectrum of services and a service charge to match.

The apartments we have are old school in comparison. They occupy a traditional Art deco block, though do have a lift. When these apartments have been fully completed and resales come on, there will be some effect on the price of these apartments but more from the ripple effect of the block.  The newbuild sales will raise the average pounds per sq. ft. of the area.

It is unlikely there will be any income on a monthly basis, the property will wash its face.  The angle here is the hard capital gain on the property which will come when the lease has been extended and the when the market has normalised.

Marble Arch is the true Bull’s Eye centre of London.  You have Oxford Street on the East, Park Lane on the South, Edgware Rd on the North and Bayswater & Notting Hill on its West.  The location sits on the corner edge of Hyde Park.

With the cost of financing so low currently, you should be able to get a mortgage deal for between 2-3%, fixed for 5 years.

The real gain on this property is in the capital growth.  It suits someone who doesn’t need income, and can afford to tuck the funds away for a period of 5 years; after which time the investment should mature nicely.

Although this property may seem highly priced to the uninitiated investors, this is close to the bottom of the barrel relative to its location.  This is an important point.  We are in unprecedented times, with a future which looks even more uncertain; either by design or chance.

In recent history there have been times when, during uncertainty, investors have chosen property to park their funds to weather the storm.  On one level this might seem unintuitive, however, on another it makes perfect sense.  When the economy is fluctuating, isn’t something real, that you can touch, a good place to invest your fiat money?

Property is the logical conclusion, as is gold.  And on a global playing field, London property fairs well for the international investor; moreover, they only seem to know certain spots in central London.  Rightly or wrongly, the rest of the UK doesn’t exist.

Suresh Vagjiani

Suresh Vagjiani
Suresh Vagjiani
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