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The yield speaks for itself

18th June 2019

We have recently exchanged on a property in W2 in a block called Park West.  There are always suitcases going in and out of the small lifts.  There are hundreds of flats in the block.  Strange cooking smells waft around the building’s communal parts.  The décor looks cheap and from the 1970s.  Not a place I would like to live.

However, from an investment perspective, the location is solid.  A little further down the road you have Marble Arch, and the new development going up there done by Almacantar.  Rumour has it, the flats there sell for £4,500 a sq. ft., to put this in perspective this means a one bedroom flat consisting of 650 sq. ft. will cost you nearly £3M.

We have bought many, many units in this block on behalf of our clients, and I suspect will continue to do so.

The location is solid, they rent well, despite my personal sentiment.  And most importantly they rise in value almost year on year.

We did a transaction there last year, where we bought a large lump of 2,185 sq. ft. for £1.65M.  At the time it was arranged as one flat.  This equates to £755 per sq. ft.  However, originally it was three flats.  The angle here was simply to convert it back into three, and rent or sell on the properties.

This plan is in motion and at the tail end of its project life.  Flats in blocks can take rather a long time to get permissions through, as you have the managing agents involved, who generally are not motivated to get off their behinds to do anything.  And then you have another layer, permissions required at council level, not to mention the utility companies.

The average price of the properties in this block float around the £1,200 a sq. ft. mark.

Our recent deal in this block, which is in the midst of completion, was purchased for £575,000 which equates to £821 a sq. ft. this is a discount of 32% in a W2 postcode.

This property is on the ninth floor, some would say it’s a penthouse.  The finishing to this property is the best I have seen in the block.  The joinery is all bespoke.  The doors are all solid wood, the reception has rather grand sliding doors with windows.

This is clearly not the finishing you would put into a BTL property.

Bearing in mind the floor and the level of money put into the interiors, I think this would justify a premium above the average for this property in a stronger market.  I would predict anywhere from £1,300 a sq. ft. for this property.  In price terms this comes to £910,000.  Time will tell but I believe this kind of level should be achievable.  The yield on the property is 5.8%, based on a £650pw rental.  This number should tell you all you need to know about the deal.  You would be hard pressed to find a yield of 5% in London, let alone in a central postcode.  In this location the yield floats around 2-3%.  5.8% is solid testimony to what a good deal this is.

Suresh Vagjiani

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