Valuers, sharpen your pencils. Here goes: a willing developer agreed a price of £885,000 last year with a willing buyer to purchase an off-plan two-bed flat in Nine Elms, near Battersea Power Station. The buyer has now posted the 760 sq ft flat on Zoopla, asking £760,000. A real life example, by the way. A mortgage lender asks you to value an unbuilt replica being sold by the developer for a happily agreed price of £885,000. What’s your number?
An FT survey last week found one-third of the homes for sale on Rightmove in Nine Elms are re-sales of as-yet unbuilt apartments. How many of them are flippers taking profits? Hard to tell.
But values look closer to the £1,000 per sq ft being asked for the 760 sq ft flat, rather than the £1,165 paid to the developer for that apartment. Are we seeing what might be called “flopping” – flippers taking a loss for fear of something worse? Maybe. A bit early to tell.
There are 20,000 flats in the Nine Elms pipeline. Prices will eventually be powered by a new Tube line. For now, all are sold off-plan. At least half are sold abroad. The gap between what buyers are promising to pay on completion and what the flip/floppers are asking is presumably being closely monitored by developers. Their worry must be that if even a few “floppers” are taking a 15% hit today, where will prices be in 15 months’ time?
Domesday scenario
This week, a London Land Commission project was launched, promising a “Domesday Book” listing all public land in the capital. Last week, chancellor George Osborne promised “sweeping” reforms to the planning system to stimulate house building.
Two excuses for a final weary wail, after a long rant here on 4 July decrying empty political promises to build more homes. Gordon Brown did much the same during his bright morning as chancellor in the late 1990s.
Imagine new homes as cabbages; imagine cabbages in short supply. What would Osborne do? Free up petty rules that prevent farmers from growing cabbages, of course. Would that increase the supply of cabbages? Maybe. Would a database showing new fields for sale help? A bit.
But, in both cases, only if the farmers have the capacity to increase production and, more importantly, feel a profit could be had at harvest time. Maybe quiz the suppliers of homes instead of offering more fields?
Shadowy world of lending
The number of “non-bank” UK lenders has grown by 150 in three years, Savills said last month. What was not clear is where they get their money.
In the US, the cash apparently comes from highly regulated banks. Last week, a red flag was raised by the Office of the Comptroller of the Currency. Bank-to-shadow-bank lending has jumped by 230% in three years, most of it to fund commercial property, land and construction.
Can the Bank of England please ensure the same thing is not going on over here?
Tipping point at Race Day
To the Property Race Day at Ascot and a rendezvous with top tipster Simon Hope of Savills. The global head of capital markets has good form. “One of the cleverest guys I’ve met in the sector,” said a source.
Here is a man who clearly knows his horses, I thought, as Simon galloped through the form card, dispersing tips with aplomb. What could go wrong?
Follow Simon! I may not have followed his tips precisely, because the rest of the day seems a bit hazy. But I did trot home penniless.
A fund of knowledge
Not a week goes by without news of an “innovative crowd-funding solution”. Promoters pushing penny-ante projects seeking £500 to £5,000 to build flats in far-flung spots. Schemes that will blow up in any downturn.
That was my ugly mood when going to see Tal Orly just before Christmas (sorry for the delay, Tal). Tal runs Cogress, a collective investment business. A company that only takes multiples of £20,000.
I asked a series of very ugly “what if?” questions. All were answered so convincingly that I came away wishing I had a spare £20,000.
