“The times, they are a-changing”

“The times, they are a-changing”

Bob Dylan

Or are they??
Don’t panic people, I am not about to take issue with civil rights movements, although to be fair, we could do with our own version of Bob Dylan singing tunes at the border and blowing some sense into the wind.

No ladies and gents, I am of course making reference to the advent of NEW DEVELOPMENTS …….everywhere! 

Over the past few weeks and months, we have witnessed the launch, pre-launch or announcement of new schemes to hit the market, both residential and commercial. In short we are potentially looking at over 25,000sqm of proposed office development in the shape of World Trade Centre, Victory Place, Midtown and NW1 and approximately 200 new residential units with the recent launch of Imperial Ocean Plaza and Midtown.

The last time we saw such activity was between 2003- 2005, where developments such as Ocean Village phase 2, Kings Wharf, Atlantic Suites and The Anchorage took to market and between them dumped approx. 450 units on to market. 

So, what do we make out of this new era of property development? 

Wouldn’t YOU like to see the Bigger Picture?
(we’re going to focus on Residential this time round)

Quite a statement by any measure, but when delivered by a Real Estate Agent, you can’t help but stop and think whether you actually want to explore the prospect any further.

It’s been a good 6 years since we saw the last dip in the market, not driven by economic recession I might add, but by pure and on occasion unadulterated speculation which left us with the near 250+ properties for sale and more lettings than we cared for. Over the period we have seen the market dip by an average of 20% (with some developments faring better than others) and rise again to beyond 30% of the position back in 2007 – a pretty serious movement over such a short period.

Back in 2011 we had hinted at the fact that the market had in effect come through the turbulent period of over-supply and we entered into a new period of real and sustained growth driven primarily by continued buoyancy in the economy, which by the way, continues at an increased pace year on year. In essence we’ve had 3 very good years which has seen the hardening of prices at all levels of our property market, plus the creation of a new tier in the market – the fourth tier so to speak, one that we call the “upper high value” market – the £1m+ range. (You can read about this in previous issues of our magazine )

Demand and growth in the market over the past 36 months, has taken its toll on the portfolio of properties available. Today there are no more than 100 units for sale to the immediate home occupier / buy to let investor; which from a numbers point of view is the lowest we have seen for some time. The impact of this is clearly seen by the rate at which prices have increased, over the past 18 months in particular – an example; 

• one bed at Atlantic Suites (May 13’) sold for £305,000, sold for £360,000 (Oct 14’) – two bed Ragged Staff Wharf (April 13’) £415,000, sold for £525,000 (Oct 14’) - three bed Kings Wharf (April 13’) £575,000, sold for £700,000 (Sept 14’).

So, it’s sensible in our view to assume that a new impetus in the market of new residential schemes is a positive, and considering the numbers involved, unlikely to drive prices down, particularly when considering completion dates of Imperial Ocean Plaza, likely 2017/18 and Midtown, likely during the same period if not earlier. So to speak, the occupier market has another 24 months to see further growth, unlikely to be at the same pace, but certainly increased rates / sqm are on the cards. This is NOT to say that the market is set to take a dip after 24 mths, but one needs to take into account what up take there is from owner occupiers, buy to let investors and speculators, on these new schemes, in order to take a sensible longer term view. I’m staying on the positive side of the fence for now, albeit with a cautious eye on what to put your money on.

The target market / the product / the pricing!

One factor to consider amongst all of what is happening is the impact of the speculative market. Although there is no question that the market is in much need of new developments, given that portfolio numbers are at an all-time low since 2000; the release of near 200 units on the market will inevitably attract speculators. Who are these speculators??? Well they come in different shapes and sizes and will have different expectations, but in short they want to make a quick turn on their investment. Question is, where’s your best bet? Well, history will no doubt present its own views on this and you, the reader, will have your own preferences and opinions.  But key to all of this will be; who’s your neighbour, i.e  who else has invested? why are they invested? and what investment mix (type of buyer) there is? To make the point; if you are invested with a healthy ratio of owner occupiers, buy to let investors and speculators, with the latter comprising of experienced players, one would say that you’d be in good shape. If however you are invested with a high ratio of speculators, driven by quick turns – well, the risks are blatantly higher.

I am fortunate enough to be presented to clients looking to invest whom will say, “I prefer to invest in properties that only I would be prepared to live in”….. these are sensible people in my view. It’s not just about a buoyant market and jumping on a gravy train, but rather, what you buy with particular respect to the end product, it’s location, its view, the amenities and the layout and distribution of the property – all of these factors are key when investing in property and should not be taken for granted.

During the last development boom, which was speculatively driven in part, (hence the oversupply in 2008/9) a number of buyers were, in our view, caught out by the most important factor when buying property – price / square metre. Here’s an example; 

• you might have two properties in high end developments, both of which are three bedroom units and priced at £495,000 and £650,000 respectively. The former will come across as a deal, simply by sight of price….until you consider the rate per sqm, in other words what are you actually paying per sqm of property. Pricing and what you actually pay for your internal and external areas is crucial!

To summarise: 

Consider all of the facts, consider the bigger picture!

If you’ve made it to hear, thank you for sticking with me in this latest article for the BMI Magazine. We try always to make offerings as light hearted and informative as possible and I do hope that we have met with these expectations.

We are always at your disposal if you are interested in learning more on our thoughts about the market and how best to approach purchasing off plan. 

We look forward to seeing this new era in the market unfold and hope to continue to keep you abreast of the opportunities and the market position as we see it.

Finally, a big thanks to all those who support the magazine and who have continued to do so over the years.

Sincerely,

Louis C. Montegriffo

Managing Director.