Central London Property Market Review

In spring 2008, I commented that it felt as though we were being visited by the old Chinese curse “may you live in interesting times” and, whilst it was then pretty clear in the aftermath of the nationalisation of Northern Rock that ‘some-thing’ was happening, it wasn’t entirely clear as to what exactly that ‘something’ was going to be.

By December 2008, a host of hitherto invulnerable banks and financial institutions had gone bust or had merged and that ‘something’ had proven to be a wholesale melt-down of the banking system, accompanied by a full-blown recession.

In retrospect, there were a couple of convenient staging posts in this dramatic sea-change. The bull market ended when Northern Rock went into public ownership, and a vicious bear market started when Lehman Brothers went down. The rout was at its most frenetic when Bernard Madoff threw his hands in the air and admitted deception on a grand scale.
The effect upon the prime-central London market was equally dramatic. By the end of February 2009, prices had fallen by between 25% and 30% from their peak in December 2007. These are horrifying figures, of course, and whilst it should be remembered that the total effect of the 1990-93 recession upon the prime-central London market was about the same, this was a gradual slide which took place over a four-year period, rather than fourteen months. To put some flesh on these bones, you need to see a number of very similar houses or flats changing hands on the same street during the same period to get a clear picture of how the world has changed; unfortunately, life is rarely so convenient.

However, one particular road in Chelsea has seen exactly this happen and the figures are as follows:

  • In February 2008, we saw a nicely presented
    4,500 square feet house exchange contracts for
    12.75 million.
  • In November the same year, it failed to complete, and
    was then promptly resold for 11 million.
  • The next house on the road to sell was in spring
    2009 and was very similar to the first (albeit
    unmodernised) for 6.45 million.


Now, even if you factor in the 2 million necessary to do the work and the two years of aggravation along the way, this is still quite a discount and is a dramatic illustration of what a difference a year can make.
And yet, another six months on, and that certain ‘something’ has changed yet again; the stock market has rallied and asset values have firmed. The stagnant pool of unsold London houses has been mopped up and the supply of new houses to the market has been cut, as if a tap had been turned off, and the buyers are back and keen to buy. Consequently prices have firmed by approximately 10% and, almost unbelievably, there are now numerous tales of gazumping circulating amongst the estate agents, and the Royal Institute of Chartered Surveyors are reported in the press as saying that house prices are rising.

In summer 2009, by way of confirmation of this a third similar – but modernised – house on that particular road in Chelsea sold for circa 9 million which has now, once again, neatly re-based the market for houses on that street.

The net effect of the economic roller coaster of the last eighteen months upon the prime-central London market is that prices are more or less back where they were in the late spring of 2007 and, once again, prospective buyers of the best properties are confronted by a pretty dismal choice of houses.

At the time of writing, the indications are that the autumn might bring more houses to the market – this is good.

What is bad, however, are the stories of estate agents desperate for properties to fill their depleted registers, over-valuing in order to effectively ‘buy’ market share.

As ever, from the point of view of most selling agents, the sheer number of sales is more critical to them than the price paid, as 2.5% of 2 million is much the same as 2.5% of 2.5 million; what makes the difference between bust and bonanza is whether they make two sales or ten. The axiom of the business is that unless you get the stock in the first place you won’t make any sales at all, so from a selling agent’s point of view, you may as well have stock at too much money as opposed to no stock at all.

Hence, whilst the world is a less certain place than it once was, it does look as if it has started to turn again about its economic axis and neither the financial market nor the property market are any place for the inattentive or casual buyer: the differences between yesterday’s price, today’s price and tomorrow’s prices are more critical than ever, and the potential cost of mistakes are huge – hence the necessity to get the right advice before jumping in feet first.

So what news of two of the biggest players in the drama of the last eighteen months? Dick Fuld (the erstwhile Chairman of Lehman Brothers) allegedly used to book tables in the best New York restaurants facing the entrance so that all who entered might pay homage, whilst Madoff used to like to dine in private.

Today, Fuld still dines in the best restaurants, but chooses a nice discreet table and sits with his back to the room. Madoff, by comparison, dines in a prison canteen in the company of many new and exciting friends, presumably with his back to the wall and a keen eye on the entrance.

Saul Empson, Director – Haringtons UK, Autumn 2009

Scroll to Top