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
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
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
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
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
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, Onthemarket.com, 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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