The aim of this Market Roundup is to offer a ‘tour d’horizon’ of the market we operate in - looking back over the last year at some of the major developments and legislation that have shaped, and are shaping, our market. We’re not attempting to predict what is going to happen, something of a mug’s game, but hopefully pulling some threads together to create a comprehensible overview.
So where are we? In London what is surprising given some of the headlines, is that the market in Central London has gone nowhere in the last ten years. There have been some spectacular sales, particularly of big houses and flats but these are outliers in a much more prosaic ‘normal’ market which has been, and remains, broadly flat.
The most damaging to the top of the market (on top of an existing penal level of Stamp Duty) has been the decision of the ‘growth’ Chancellor to drag non-doms into the Inheritance Tax net on their worldwide assets. Though she appears to be trying to shut this stable door before thousands leave, in our experience it is already too late and the decision has been made by many. Those leaving are bad enough but it is those that won’t now come which may be worse. Conversations in Asia and around the world with potential buyers (and investors in the UK) are not what anyone pumping the line that Britain is open for business would like to hear.
Though damaging it is not nearly as bad as some recent press reports have made out. Transactions are down compared to previous years but certainly not catastrophic. In the outer areas of London, with a different demographic, life is going on very much as usual.
The country market is broadly similar - but had a noticeable spike over the ‘Covid’ years which has unravelled recently reflecting the retreat from ‘working from home’. This graph (from Savills) represents a broad market that also includes houses that our clients wouldn’t touch - blighted by pig farms and motorways for instance. For the better houses, where the tick boxes for the best is always longer than in London, the downturn hasn’t really happened. The internet and working from home have done two things. The first is to enable people to extend their weekend and secondly to stretch the acceptable distance from London: a good house in Shropshire will sell for only a little less than the equivalent in Sussex.
In London some of the major developments of the last few years have come to fruition. The most prominent is the Battersea Power Station where Apple, the anchor tenant, has moved in, giving the all-important heft of a large daily footfall. The retail and restaurant tenants are now fully in, and the Turbine Hall is now a spectacular - and unique - shopping destination.
It is worth reflecting on what works - and what doesn’t - in these major developments. Transport is one and the Northern Line tube spur has been vital in the success of Battersea. Also, a really good range of shops, cafes and restaurants on site or on the doorstep. In the case of the Chelsea Barracks this is close by, in the form of Pimlico Green and Sloane Square. The third is an overall master-plan that is concerned with placemaking; one of the points of being in a city is to be able to leave your front door and have a cafe, a pint of milk and maybe a cinema within easy walking distance. Argent’s development of King’s Cross is a gleaming example of how it should be done. The old London estates have shown how careful placemaking can revitalise established areas. Sadly there are too many examples of the opposite. The middle bit of Kensington High Street and Notting Hill Gate - with no one landlord, are two examples. The Chelsea Waterfront development on the site of the old Lots Road power station is another. The public transport is poor, the shops and cafes almost non-existent and the overall feel is of a ghetto of non-resident owners who perhaps thought they were buying in Chelsea. Into that bucket one would have to put the wider sprawl of Nine Elms and, sadly, so many of the riverside developments that future generations will regard as sad failures. These are not office blocks that will be recycled as they age and crumble, but buildings in multiple ownership that will be with us forever.
The biggest current development is that of the old exhibition site in Earls Court. This was originally owned by Capco (now merged with Shaftesbury) who also owned the area around Covent Garden. There weren’t many synergies between the two and Earls Court was sold off to a joint venture between Delancey, the Dutch pension fund manager APG and Transport for London. Delancey have the experience of the redevelopment of Elephant and Castle and their latest plans reflect lessons learnt (good and bad) from the examples above. Work is expected to start in 2026 and the first residents to move in by 2030. The site is estimated to be completed in 2040.
The new Queensway is starting to emerge with the completion of the redevelopment of the old Whiteleys (where flats have been selling well) and the gradual upgrading of retail and food offerings. Queensway has always felt like an anomaly - a downmarket street of tourist tat and poundshops in one of the most expensive residential areas of London. These things always take longer than everyone would want, and it will likely be five to ten years before it is completed, but hopefully it will be worth the wait.
The time that all developments take has been a killer for many. From purchase of the site, through planning, tendering, construction and sale it is unlikely to take less than seven years and in that time a lot can happen - pandemic, inflation and rising interest rates - and you realise why Molior estimate that at least 70 developments in London are in trouble. There has been no rising market to bail out mistakes in overpaying, overdeveloping or thinking your site is prime when it isn’t - but building cost inflation, way exceeding headline RPI, has been the worst. In good times development can be a licence to print money: when the tide is against you even the best get into trouble.
The expansion of Heathrow has raised its head again - though one has to doubt whether this will ever happen on the past record. This isn’t the place to discuss hubs, costs or the logistics of the M25 - but what it will certainly do is disrupt the sleep patterns of more than the residents of Chelsea, Battersea and Richmond. A new runway will be approached across north and west London - think Kensington, St John’s Wood and Regent’s Park. Not ideal.
With a new Labour government has come some unwelcome taxation and legislation. The most prominent of the former is the decision to remove (partially) Agricultural Property Relief from family farms. This has generated acres of comment and anger all round and will probably be settled by raising the allowance before it cuts into a higher level than the £1m proposed in the budget. It is too early to tell how much this will affect land prices but the attractiveness of farmland as an Inheritance Tax avoidance vehicle has been much reduced - though not abolished completely. This is only one of many reasons people buy land so its effect on prices may not be as great as people think.
The proposed changes to the planning laws are another matter. The detail of the proposals has yet to be revealed but it is pretty clear that it is going to affect everyone in the countryside. Cities less so. While it looks unlikely that there will be open season in the open countryside, anywhere on the outskirts of a village or town looks like being fair game. The Green Belt, sacrosanct for three generations, is being opened up to allow building on ‘grey sites’ - those where anywhere else would be considered ‘brownfield’. This actually makes sense as the principle of halting the sprawl of cities remains, but the need for more houses where they are wanted is addressed. What is going to be much more random and unpredictable is the spread of onshore wind, solar farms and the pylons that will be transporting sustainable electricity across the countryside. Wind farms need hills and hills are very visible and there is not much you can do to sugar the pill of a pylon. And Labour is a predominantly urban party with little sympathy for countryside and NIMBY concerns.
The Renter’s Rights Bill is not a game changer - but falls into the category of yet another reason not to be a landlord unless you have to be. Its main provision is to try and get rid of no-fault evictions and stop families on benefits being discriminated against. In principle there should be nothing to complain about here, but the reality is that it will make it more difficult to get the tenant you want and more difficult to get rid of the one you don’t. The problem is that too much of this means that the stock of rental property will go down even more than it has already, and the costs for tenants will rise. This field is always a balancing act between tenant protection and the supply of the commodity that those tenants want. This is just the latest in a series of laws that have only gone one way - against the landlord.
In the dog days of the last government Michael Gove’s Leasehold and Freehold Reform Act was rushed through before the election. The main provisions were to abolish the two-year period of ownership before being able to enfranchise or extend a leasehold, the abolition of marriage value - basically the valuation gap between long leasehold and a freehold that was enjoyed by the landlord - and making it easier to enfranchise when the building has a commercial element. It also made law that any new long lease has to be 999 years, not 99. This last is the final nail in the coffin of the long leasehold business model of the traditional London estate. The reality is that many of the provisions of the act are under challenge as being confiscatory and items such as abolishing the two-year wait are hardly game changing - but as in the Renter’s Bill, the direction of travel is clear.
If you had to pick out the thing that will have the longest term effect - for better or worse - it would be the planning changes allied with the quest for net zero. Until now housing and industry has been reasonably confined. The new industry will spread itself across the countryside and where it will land will be difficult to predict. This will be a challenge for us and our clients but it’s a fluid situation that we will all simply have to live with.
