As we ease further into 2016, the London property market remains buoyant, but the dynamic of which properties are performing best is continuing to shift. Towards the end of last year we looked at how more expensive properties under £2million were performing strongest in the capital. According to reports, it is now emerging that properties worth under £1million have grown more than other price brackets.
According to the report on Property Wire, the reasons for this shift are in large part due to the fact that this area of the market, “is less exposed to regulatory change,” such as tax changes which have increased stamp duties by £30,000 on properties over £1million.
Oil prices drive high profile Canary Wharf property sales
The performance of the property market is often driven by external events seemingly unrelated to buildings and their purchase and sale. In January there have been a number of good examples of this, such as the influence that rapidly declining oil prices are having on the actions of overseas property investors in London and specifically in Canary Wharf.
Media sources such as the Evening Standard have been reporting that the ‘plunging oil prices’ have resulted in the Qatari owners of Credit Suisse’s headquarters – 1 Cabot Square – putting it on the market for £450million. This decision is reportedly due to the Qatar Investment Authority (QIA) wishing to improve its overall investment returns, after budgeting for selling oil at $65 a barrel rather than the current $34 per barrel.
Property expert Joel Brookes at Vanet commented that, “This kind of shrewd sale, in which the investor potentially stands to make a profit of more than £100million after just four years, illustrates how lucrative the London property market can be. In Canary Wharf in particular there are always investment opportunities to be had at all levels of the market, the key is to pay attention to what’s going on.”
The QIA is by no means exiting the Canary Wharf property market though, and it is has been suggested that is looking to focus on more large-scale redevelopment opportunities in the area, such as its recent purchase of the Canary Wharf Group.
“Investing in properties and ongoing developments in Canary wharf will remain a popular choice for UK and overseas investors, as it represents a secure investment at times when other types of investment opportunities are seen as being more turbulent and unpredictable,” said Joel Brookes.
Will lifting of Iranian sanctions lead to surge in London property sales?
Iranian investors meanwhile may be next to capitalise on the buoyancy of the East London property market, as the recent lifting of economic sanctions on the Middle Eastern country opens up new opportunities. According to The Telegraph, “the lifting of sanctions [in January] has unlocked an estimated £70bn of Iranian assets – and the luxury London market is in line to benefit.”
The lifting of sanctions means that restrictions on money transfers and other international financial transactions from ordinary Iranians will be eased, making it easier for them to buy homes and invest in London properties. Jennie Siebrits of investment firm CBRE told the Telegraph that Iranian buyers, “could well become a major force in the London residential market.” But she added, “It’s not going to be like opening a tap, I don’t think tomorrow we’re going to see a stampede of Iranian investors outside Canary Wharf, but I suspect it’s going to be a drip, and it’s going to be an ever-increasing drip.”
East London property remains popular
East London is currently highly popular with both home buyers and investors, with average asking prices for residential properties in Tower Hamlets increasing by almost £100,000 in 2015, according to Homes and Property. This increase is due in part to a surge of new homes becoming available in desirable areas of the borough such as Canary Wharf.
One of London’s least expensive flats meanwhile has been sold over in Clapton, selling for just £75,000. Despite this highly affordable price though, the property actually averages out at more than £1,000 per square foot, owing to its diminutive size of 75 square feet. While the story stands out due to its record setting nature, this is just another example of how even the smallest properties in London can be valuable investments.
As home buyers on modest budgets continue to search out affordable pockets of London real estate, it has also emerged that high competition for such properties is leading buyers to frequently offer above the asking price. In another article by Homes and Property, it was revealed that in 18 boroughs buyers are routinely offering over the market price in order to outbid their rivals. In Tower Hamlets for example, homes are currently selling for 4.3% more than the average asking price, equating to an additional windfall of £22,000 on average for sellers.
While the weather outside might not be on the cools side, London’s property market is quite clearly still a hot prospect.