Spring 2017

The word ‘Brexit’ has only been in the lexicon for three

years, but it feels like a lifetime. Only two years ago stamp

duty was an annoyance: now it’s the pain that keeps on

hurting – and Dr Hammond doesn’t look as if he’s going

to administer any pain relief soon. However, it would be

impossible to produce any sort of market roundup without

talking about both – but we will try to be brief.

Stamp duty has dragged down turnover by nearly 60% from

what appears, with hindsight, to have been a market top in

2014. Prices have followed – but much less precipitously:

25-30% down for some of the more overblown new

developments in dodgy places, 10-15% down across most

of the Royal Borough and Westminster, and steady – and

sometimes up – for some of the air-conditioned lateral flats

in prime locations so beloved by the footloose international

wealthy. This has been uncomfortable for developers (the

reality is that the days of the up-market developer of single

houses are over) and agony for operationally geared estate

The days of the up-market

developer of single houses

are over

agents for whom turnover is lifeblood: the share prices of

Foxtons and Countrywide (both a quarter of what they

were three years ago) and redundancies at all levels from

partners in the more traditional agencies downwards,

express this eloquently.

Brexit, as a harbinger of doom in the property market, has

turned out (so far) to be something of a pantomime villain

in that the dire warnings of ‘Project Fear’ have yet to come

to pass. Where it has really made a difference is in the

currency which has had three effects. The obvious first is to

make the UK a lot cheaper for any dollar-thinking buyer.

What is less appreciated is that, if those same dollar-thinkers

are sellers, they are looking at a commensurate loss and

are unwilling to take the hit. This has resulted in the third

effect of tightening the market with more buyers and fewer

sellers. This means an upward pressure on prices that seems

counter-intuitive – but which has been borne out in the

autumn market.

Building costs have ratcheted up year-on-year in London to

the point where many previously viable projects have been

called into question or cancelled. One only has to look at

the number of cranes decorating the London skyline to

see that these costs, which have been inflating at the same

rate that end values have been going the other way, are not

going to fall any time soon.

Building costs have ratcheted

up year-on-year in London

In our last Market Comment we talked at length about

Crossrail 2 and its impact on Chelsea. Needless to say,

the residents have been up in arms about it – while local

businesses have been mainly supportive. Currently all

rail passengers for Chelsea (which includes staff for three

hospitals) have to funnel through the decrepit Victoria

and Clapham Junction stations and on to the underground

system. However, it won’t be residents’ noise that kills

off the proposed station – but cost. The Treasury has

demanded a £4bn saving on the project and one of the low

fruits is the Chelsea station costing an estimated £900m

(mainly on the grounds that there is little potential for

extra housing surrounding it). The impact of the station

would actually be quite limited as nearly all of it would

be underground – and many of the more vocal elderly

protesters probably won’t be around if it opens in 2030.

The low fruit is the

Chelsea station costing

an estimated £900m

In the same area, the Chelsea Barracks site (the first

phase anyway) is now up to full height and the feared

visual impact on the Royal Hospital opposite, is in

reality, minimal.

If you look south you are reminded that the current view

is not exactly the finest that London has to offer...

South of Chelsea Barracks, Chelsea Bridge Road

Chelsea Barracks site, first phase

Further west, the travails of the Earl’s Court redevelopment

have been publicly on display in the write-downs on the

project that Capital and Counties (Capco), the principal

developer, has had to endure. This is a huge project:

77 acres and now around 10,000 units. To put this in

perspective, the Cadogan Estate, which stretches from

Albert Bridge to Knightsbridge, is about the same size.

Lillie Square, next to the railway line on the Lillie Road

and the first stage, is now well out of the ground

and has been selling at around £1,450 per square foot.

The demolition of the old Exhibition Centre is completed,

but the problem has been the snail’s pace of sales: only one

unit a week at one point – though this accelerated in the

autumn. Capco deserve to make a success of this as they

are a class act and have proven their placemaking abilities

in Covent Garden where they have approached it with the

same long-term thinking as the traditional London estates.

Their proposals for the main part of the site show this.

Demolition of the old Exhibition Centre

Lillie Square – first stage Earl’s Court redevelopment

Proposals for main part of Earl’s Court redevelopment

On the subject of placemaking, the big news of the

autumn was of Apple taking nearly all the office space

in the Battersea Power Station. This should guarantee

the success of the project overall as it will feed the other

commercial – shops, restaurants and bars – that will make

it a destination and a pleasant place to live rather than

merely canyons of apartments with the lights off. The first

residential stage is now up. The best thing that can be said

about it is that the Frank Gehry designed second stage will

be a lot more interesting.

American Embassy, Nine Elms


Further down the road, the new American Embassy is

now fully formed and stands out as an arresting building.

It is surrounded by a sea of second-rate boxes that it is

rather amazing that any architect owns up to. They had

plenty of time to get it right.

Apparently, when the first designs for the Embassy were

submitted, there was an area surrounding it which was

labelled ‘Kill Zone’ – which caused something of a stir in

the Wandsworth planning committee...

In Mayfair the plans for the old American Embassy have

been revealed. The architect is David Chipperfield and it

will be a 137 room hotel with five restaurants.

It is owned by Qatari Diar who must be getting punch

drunk with planning issues in London after Prince Charles

scotched their original Richard Rogers’ scheme for the

Chelsea Barracks. The Embassy, designed by Eero Saarinen

and completed in 1960, was listed just before they bought

Old American Embassy, Mayfair

it: afterwards might have ruined their love affair with

London. It will be a relief for anyone who has anything to

do with Mayfair when the Embassy moves this year as the

security that has blighted the surrounding streets will go

with it.

Mayfair (and St James’s) used to be the major London hub

for art dealers, clustering around Christie’s and Sotheby’s

(and now Phillips). Not any more. The insatiable demand

for retail space from international retail brands is pricing

them out and, in the process, altering the tone of the

neighbourhood. The scale of the demand is illustrated by

the record £2,225 per square foot paid in Bond Street by

Ralph Lauren. That is the rent per year for the first 30 feet

into the shop known as Zone A. Many of the exiles from

Mayfair will be surfacing opposite our offices in Cromwell

Place, South Kensington, where John Martin Galleries are

working with South Kensington Estates to create 35,000

square feet of space with 30 permanent galleries.

Cromwell Place, South Kensington

It is so often the commercial that drags the residential

behind it. On a larger scale you have the impact of a major

company taking huge space – Google in King’s Cross and

Apple in Battersea are obvious examples. But it is also when

a major building dominates an area. It will be interesting

to see if the ‘Paddington Cube’ (to be developed by Irvine

Sellar of The Shard fame) will do the same for Paddington.

The original scheme, known as the ‘Paddington Pole’, was

shouted down as being too dominant for the area.

The Paddington Pole

The Paddington Cube

The problem with Paddington (and Victoria) is the

number of cheap hotels that have traditionally proliferated

around stations which do little for the quality of either

the restaurants or the retail. Simply building towers of

residential flats with the lights off (Paddington Basin?)

doesn’t change that dynamic – whether it’s a pole or a cube.

If the market was a free one, most of these hotels would

have been converted into flats during the boom of the last

30 years – but planning keeps them as they are and their

A history of planning

applications puts many

buyers off

down-market effect on the area is not going to diminish

any time soon. This is why Pimlico has been ‘up-andcoming’

ever since we can remember.

The threat of unwelcome planning permission is becoming

a real issue in many parts of the country market. Every

owner of land sees a pot of gold in their plot, and the

boundaries of the local plan are being tested daily across

the country. The problem is not so much that it happens

– most of the time it doesn’t – but a history of applications

puts many buyers off. A good example of this is in the area

below the Cotswold escarpment around Evesham which

contrasts with the Cotswold Area of Outstanding Natural

Beauty where there is a presumption against development.

There has always been a pricing difference between the two

– but fear of planning has made this noticeably wider.

The country market is also subject to the effect of a

local draw that attracts metropolitan buyers seeking some

of the sophistication of their London haunts in the country.

The opening of the Hauser and Wirth gallery in Bruton,

Somerset is a good example. Another one is the Great

Tew Estate in Oxfordshire where Soho House have

opened their latest outpost called, surprisingly, Soho Farm

House. This part of the world isn’t short of buyers and

owners whose primary stamping ground is Notting Hill but

it has now also become the go-to place for the glitterati –

including the Beckhams.

eal teeth in its attempt to take a bite out of Rightmove’s

huge margins, but what has happened is that with

Onthemarket’s policy of letting their agents choose one

other online offering, Rightmove has been the preferred

choice. Zoopla has been the loser – but is still the number

two – and Rightmove has become even bigger. We watch

developments with interest.

At the beginning of last year we felt that the market towards

the end of 2016 would be stronger than many imagined.

This was because we thought that, by then, buyers would

be getting used to the penal stamp duty regime and needing

to get on with their lives. ‘Getting used to’ is probably

the wrong phrase as all buyers hate and resent stamp duty

at these levels (many fail to factor in the second home

Soho Farm House

A year ago we opined that the new kid on the online

estate agency block,, would be eating

the lunch of the two market leaders, Rightmove and

Zoopla. What has actually happened is that Rightmove

has consolidated its position as market leader and now has

a market capitalisation of £3.7bn. Zoopla is on £1.5bn

and Savills, a worldwide, multidisciplinary agency is priced

at only just over £1bn. Onthemarket is owned by estate

agents and ‘not-for-profit’, which should have given it

The truth is that sellers have

had to share the burden in

the form of price reductions.

Where they have yet to smell

the coffee, their houses linger

on the market unsold

surcharge) and look for any means possible to mitigate it.

The truth is that sellers have had to share the burden in the

form of price reductions. Where they have yet to smell the

coffee, their houses linger on the market unsold – adding to

the tightening of the market that we alluded to earlier. So

far this year, it looks as if this pattern will continue – as long

as financial markets stay upright.

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