Wary buyers reluctant to risk buying a premium-priced property in the volatile prime central London market are adopting a perhaps-surprising tactic - they’re looking for doer-uppers.
The highly-regarded buying agency, Black Brick says the wealthy individuals who are the bread-and-butter of the PCL market are currently reluctant to pay the going rate of £4,000 to £5,000 per square foot on a luxury property.
Instead, increasing numbers are purchasing distressed apartments and houses which can be renovated, thus minimising their personal risk and increasing property values.
“We’re seeing an increase in properties being sold because a family member has passed away or that have been in a family for 20 to 30 years. Although it’s a buyers’ market at present, these properties have still gone up considerably since they were purchased many years ago and therefore sellers are willing to take a deal or reduced rate on their home” she adds.
“We recently sourced a property in Marylebone for a client which was for sale at £1,200 per square foot; the buyer needed to spend £300 psf renovating it, but when it is complete it will be worth upwards of £1,800 psf.”
The agency says it also recently completed an deal for a British client; the house was sold with planning permission to be almost doubled in size through a basement extension, developing the side and the rear of the ground floor level as well as a loft conversion.
In a statement which reveals the high sums involved in the niche high-end of the prime London market, the agency says it secured a 19 per cent discount - equivalent to a cool £1.1m - and contracts exchanged at £4.85 million.
“We estimate that the cost to refurbish and extend will be £2m and once done the house could easily be worth somewhere between £10m and £12m” according to Black Brick partner Caspar Harvard-Walls.
He describes this approach as giving “a huge degree of comfort in an uncertain and fragile property market.” Even so, the agency is warning that given the costs of acquisition, investment buyers should be prepared to hold on to the property for at least five to 10 years before they see significant growth in its capital value.”