Value Valley – The great divide between buyer and seller

Our latest Wetherell Mayfair Market Report deals with the impasse in the residential sales market in Mayfair and the positive knock on effect to the rental market.

So far this year, there has only been a couple of handful of sales in residential Mayfair property. In the whole of 2007 there were 33 agents eating off the residential sales market cake. By 2008 the cake had shrunk to 20 agents and now to this year you can count the selling agents on two hands.

That is not to say that the market is quiet, viewings are up but new instructions are low. The amount of price reductions compared to the whole market is now 34%. Offers on individual properties are up but the difference as a percentage between buyer and seller is between 15-20%.

The difficulty for buyers and sellers alike is – what price do you place or bid for the property on the market? Do you put the property on at a high price to give the buyer a “perceived” bargain of 20%. Does the buyer just bid 20% off everything without the knowledge that the property has just been reduced by 10% already?

Where are the anchors to value, with low stock, vague transparency on sales value and continuing media speculation as to market falls across all industries.

Vendors are reluctant to sell by taking a low offers from potential purchasers

Don’t want to put their money in bank – low return and risk in bank
Lack of alternative property to roll money into
Lousy conversion rate if repatriating money back home
Loan to Value issues – Lending houses won’t accept low bids on repossession properties

Buyers who have cash in bank want to invest in bricks and mortar but are still not buying

Influenced by media reports of continuing downfall in prices
Lack of supply of property available
Lack of transactions gives no anchor on present or future value
Lack of finance
Loan to Value – Valuers too cautious and banks spread to wide
Buyers renting and waiting for further falls

Rental Market has 25% more applicants this year than last and a 15% rise in applicants over £2,000 p.w.

Potential buyers waiting for right property to then compete on speed and cash
Buyers think further falls to come and worth investing 5% of capital value in renting to gain a further 10% on future purchase
Companies reluctant to use cash flow for purchase of accommodation for directors
Renting over the year cheaper for executive costs than hotels
Easy exit strategy if break clauses in place

Wetherell advice to Sellers

Beauty parade a number of estate agents in your area
Chose the agents who you feel has longevity and gives advice backed up with comparables
Don’t go for the highest value and lowest fee
Listen and take the advice the estate agent gives you
It is better to competitively price the property at a selling price and create competition

Wetherell’s view is that investing in bricks and mortar at this point in the financial cycle is a sound investment

Property can be lived in or create an income stream
Property will be a good hedge in an inflationary market
Property is a tangible asset

Prime property still sells for prime prices but in prime locations – Where better than Mayfair

Geographically bounded
Protected by planning restraints against over-development
Lack of supply
World residential “brand” with international appeal
Rental values under-pinned by hotel RAK rates
Capital values under-pinned by income stream
Offices returning to residential use
Rejuvenation of Mayfair as the prime residential location

Wetherell view on the Mayfair market is “positive but frustrating”. We currently have £36.6M of outstanding offers from 11 buyers which have been rejected by the vendors. Wetherell have £67M of property openly available for sale amounting to 24 properties out of a total market of 123 properties with a total market value of £405.6M. Few of our properties have price reductions due in part to correct initial marketing price and a reluctance of vendors to drop further. Viewings are up over 30% since end of 2008 (December: 71 viewings but 103 viewings in last four weeks). Offers on property are up and the “hot” applicants’ purchasing power amounts to £59M

“Wetherell is a force to be reckoned with in London’s prime real estate market”
Spear’s Wealth Management Survey Property Power Index 2008

Peter Wetherell has worked in the area for over 35 years and celebrated 25 years of Wetherell in 2007. Wetherell are Mayfair’s leading estate agents specialising in the sale and rental of houses and flats in London’s No.1 area. Operating out of a prominent corner office located in Mount Street, Mayfair’s up and coming top end fashion High Street