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The Mantra for Property

Last week I met a long time property veteran of Edgware Road, you could say he’s part of the Edgware Road mafia.  I always thought him to be an Arab, as these are the people whom he does his business with, what’s more I often saw him with coloured chanting beads, these are usually carried by the Arabs on Edgware Road, walking and whilst smoking the Hookah pipes. However when I questioned him he declared himself to be a Jew, who speaks Arabic, the beads he carries around to reduce the number of cigarettes he smokes as a distraction for when he gives up, which he has done time and time again.

He has been based in the upper part of Edgware Road for several decades, I have known him for about 15 of these years. Needless to say he knows the patch very well, and has his finger on the pulse. Usually his property dealings happen within his closed circle of contacts which he has built up over the years. He knows all the players in the market and has seen them rise, and some fall.

I sat with him a week ago, he is now concentrating his clients’ money on the north side of the A40 flyover. This is a patch of Central London which has yet to rise to match the surrounding areas. This intuitive local perception he has is backed firmly by a Knight Frank Report which predicted the north side of Hyde Park, which starts from Bayswater Road upwards, to rocket in the short term future; more so than the other sides of Hyde Park, which have all had their time now.

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Some of the most expensive residential property in the world surrounds London’s Hyde Park.

The 625 acre area of green space which makes up Hyde Park is seen to be the epicenter of the prime central London residential market and properties located close to the park achieve large premiums.

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This patch to the north has traditionally been seen to be the poor side of Hyde Park, it has had an unsavoury reputation especially along Sussex Gardens for many years, known also for its cheap hotels which line this street (which are not so cheap anymore, not to purchase anyhow).

The regeneration of this area will be completed with the arrival of Crossrail at Paddington in 2018 and the development of the wider Paddington Basin area, where many blue-chip companies have already relocated including Marks & Spencer, Rio Tinto and AstraZeneca.

The area’s future growth has been underpinned by two major acquisitions one is the purchase of Whiteleys Shopping Centre by Qatar money and the second more recent is the purchase of West End Green by Berkeley Homes, a 2.66 acre site on Edgware Road, to the north of the A40 flyover. Berkeley Homes is planning to build a 600 unit new property scheme in this location.

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Tony Pidgley, Chairman of the Berkeley Group said:

“Edgware Road has great history; fantastic transport links and sits between two of London’s best parks. We are very excited about delivering a world class development which will have its own distinct character and integrate with the existing community.”

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Though the north side of Hyde Park has been called the poor side of the park, this little patch has been seen as the poor part within this poor part. This reputation comes from the mostly ex local blocks which dominate the area north of the A40 and Edgware Road on the side towards Baker Street. This is where the Lisson Grove Estate is nestled.

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I have been saying for many years there is a myth attached to ex council property. The perception this label creates does not match the reality when purchasing an ex council in Central London. In fact I would suggest the reverse is true, ex council properties can often make better Buy to Let investments than their private counter parts. This is due to three reasons: one, they were built when property prices were not at a premium, because land was not so scarce at that time, therefore when you purchase a two bedroom it is a properly sized two bedroom property, unlike many of the new builds sprouting up all over London. Secondly the lease is generally a long one, and to extend this is not extortionate. Thirdly the service charges tend to be low, this means you might actually be able to make some money from the rental income, a rarity when purchasing private property in the Centre of London.

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We have a project going on in Bell Street which is in this ‘poor part of the poor part’ of Central London. The project consists of four freehold town houses, which we originally purchased with a view to sell on quickly once permissions had been granted. However for one reason or another we have ended up developing the project through to completion.

The project in all honesty has not been going to plan, we purchased the site for £4.4m and we had serious offers at 5.2m and a touch higher as well soon after, which we did not accept. There was a down valuation by the bank’s valuer who decided the site value is only £4m as opposed to the valuation we had of £4.8m at the time of purchase, and the project costs have grossly over run.

Despite these setbacks I believe in this project, the timeline and the costs have both over run, but I believe in the area which is what drove the investment in the first place; this will be the saving grace.  The first mantra of property investment is location, ultimately this will lift the project upwards, and I suspect to values we even did not anticipate at the time of purchase.

Currently we have a freehold in a very posh part of London, which we are due to get the contract on very shortly. The property is being purchased for just over £1,000 per sq. ft., in an area where prices go for £2,000 per sq. ft., being freehold you dispense with permission normally required from the developer. This property even as it is is worth £3.2m, we are managing to pick this up for £2.5m, and this opportunity is currently open for investment.

The Real Deal

Hyde Park, London, W1

Purchase Price: £1.75m

  • A large two bedroom raised ground floor flat in a highly sought after location
  • Share of freehold
  • Very high cielings
  • Period features
  • Low service charges
  • Properties in this location are being sold for around £2,200 per sq. ft. while we are getting this for around £2,075 per sq. ft.
  • Very good buy and hold opportunity

Call us now to secure this deal!

Suresh Vagjiani

Sow & Reap

A Property Investment Company

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!Tips of the Week

A heavily discounted property may not be the best buy. Where is the price going to go in the years to come? It may stay the same, or go even lower.

The market will not be rising in all locations at all the times, therefore when developing property it is wise to have another exit plan besides reselling.

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