Buying, selling and letting

Jemima Khan, the high society gal and ex-wife of the cricketer Imran Khan, is said to have finally sold her huge Grade II* listed house she owns on a square off the King Road in London after six months waiting for a buyer.

In 2006 Jemima and her then boyfriend Hugh Grant bought the house for just over £18 million from city financier James Arbib through a Cayman Islands registered company. But they failed to moved in – the couple didn’t like the décor and, by the time a £2 million upgrade had been completed, they were no longer an item despite talk at the time of marriage.

Last year the house was put on the market for £26 million offering vast scale (6,000 sq ft), a quarter acre of gardens, three garages and nine bedrooms.

From the street the house looks surprisingly modest given its likely price tag, but the façade hides a long and wide property with a second ‘front’ with its own portico at the side.

The worst of the property slump is over as buyers return to the market and house prices show signs of rising again, it has been claimed. 

Two of the UK’s leading estate agencies this week called the bottom of the market, revealing that buyers are returning, the number of house sales is picking up and that, in some areas, prices are even rising again after months of huge drops.

Knight Frank says that “the situation has improved markedly since the turn of the year” and that although prices continue to fall in the first four months of the year, it was at a "much reduced pace".

“We’ve seen drops of between one and two per cent a month as opposed to to the three to four per cent monthly drops we became routinely used to in the run up to the end of 2008,” a spokesperson says.

“And by April our prime central London index even managed to post a positive result, with prices climbing 0.4 per cent – the first rise for 13 months.”

Another high profile agent, Hamptons International, is also feeling much more positive – revealing this week that 13 per cent more buyers registered with it in April year on year, and that sales jumped by 27 per cent over the same period.

“There have been three consistently good months of UK sales activity and although this is not at the boom time levels of 2007, it is certainly better than for some time,” says Jane Jordgensen of Hamptons International.

“In fact, vendors are three times more likely to secure a sale than this time last year. The start of 2009 has definitely gone as well as expected and we are beginning to witness healthy levels of trading.”

The only problem for agents is a shortage of houses to sell – Hamptons says the number of new instructions is down 40 per cent  year on year, while Knight Frank reports properties available for sale down by 28 per cent.

Neither company can say for sure why the market is improving – given continued gloomy headlines in the nation’s papers – but a partial answer lies in mortgage affordability which the Council of Mortgage Lenders says is at its cheapest since 2004.

Nick Leeming of propertyfinder.com says anecdotal evidence from other agents also points to a recovery in the market.

“The past three or four months have definitely been better but some agents report that much of the new activity is among cash-rich buyers investing in property – so they are worried what happens when all this spare money runs out.”

If there is still a recession-proof, high-octane end of the property market then Robert Bailey, a slim 45-year-old with a moderately cut-glass accent, is its undisputed kingpin.

In central London’s classier social circles where the credit crunch means buying a BMW instead of a Bentley, he is referred to as a ‘home finder’. But in practice he is a matchmaker to London’s well-heeled house hunters helping them discreetly locate, haggle over and then buy some of the country’s – and the world's – most expensive property.

So when high-profile industrialists like Lakshmi Mittal or society gals such as Jemima Khan want a home in London's famous postcodes and have tens of millions of pounds to spend, it is Bailey to whom they turn for help.

Consequently Bailey has been described as London’s best-connected property guru, often to be seen scurrying around central London wielding his little black book, packed with familiar names from the Sunday Times Rich List.

“I haven’t got it on me today but in reality most of the important contacts are in my head,” he told me as we talked in his Kings Road office building, which he shares with clothes designer Tom Ford, among others.

Bailey began his career at the age of 19 learning his networking skills in Mayfair but then moved on to doing deals in Knightsbridge both for himself and later working for high profile agents such as Strutt and Parker and Knight Frank.

“I’ve built up a client list of wealthy private individuals who simply don’t have the time or knowledge to complete complicated property deals in areas like this,” he says.

Despite the necessary cloak-and-dagger secrecy of his world, the word-of-mouth property market in central London is a thriving one; Bailey says 70 per cent of purchases are completed via ‘representatives’ like him.

All of them – which number in the dozens – are adept at building trust in the highest social circles – they need the connections to know who lives where, wants what and when they will want to buy (and sell).

“Therefore, I’ve been with clients on holiday, to their weddings and once even spent a week on one of their yachts, which was very jolly,” says Bailey.

“But it’s the local knowledge that impresses them. One US banker I met at a party told me what his house on Cadogan Square looked like and I told him which number it was and the colour of girlfriend’s hair – the only thing I got wrong was that it was his wife.”

What will it take to lure first time buyers back to the new-build property market? This vexing question has taxed the minds of Britain’s house builders over the past 18 months and now the deals are rolling in – some so generous that, not so long ago, they would have been considered impossible.

One beneficiary of this largesse is 20-year-old Charlotte Oliver, a budget-airline stewardess working out of Bristol airport who until recently was living with her parents in Wootten Bassett near Swindon.

Perplexed by being a stay-at-home daughter, Charlotte discovered that a development around the corner from her parents’ home was offering a part-buy, part-rent deal that seemed silly to turn down.

The two-bedroom apartment she has bought at Celsus Grove, built by Thames Valley Housing, has cost her just £3,400 to move in – the ten per cent deposit she was required to put down – plus payments of £520 a month to cover mortgage premiums on her £34,000 loan; rent on the remainder of the £115,000 flat’s value; and service charges.

This deal means that Charlotte owns 30 per cent of the property while renting the remaining 70 per cent. After a year she can then buy chunks of the flat’s value in ten per cent blocks and, when she fully owns the flat, would be free to sell up and move up the property ladder.

"When I joined the airline the training took place in Stansted so I had to live away from home for the first time,” says Charlotte. "But when I returned home to live in Swindon it just wasn't the same living with my parents and sister - I just had to move out and have my own place.

"But I didn't want to rent and anyway, my dad worked out for me that it would cost the same to rent a house as it would to take up the Thames Valley Housing deal."

So is Charlotte alone in her peer group as a property owner? "Quite a lot of my friends have bought properties but I am definitely the youngest," she says.

Celus Grove is Swindon is a development of 45 two and three bedroom homes – including seven houses and 38 apartments – that are available through Thames Valley Housing’s  New Build Homebuy scheme.

For more information visit www.homebuy4u.co.uk

Many newspapers yesterday reported that Hazel Blears is unlikely to survive the next cabinet reshuffle after revelations that she utilised a well-worn tax loop to dodge an £18,000 capital gains bill by re-designating her constituency ‘second home’ as her main residence for tax purposes.

The motor-bike riding Communities and Local Government Secretary sold her flat in Kennington, south London, in the summer of 2004 for a £45,000 profit but paid no tax on the windfall even though she had claimed the property as a second home when receiving thousands of tax-payer pounds to do the property up.

But Blears is not the first high-profile politicians to fiddle their paperwork to avoid paying large tax bills. Although like Blears their tax ‘avoidance’ measures did not break any House of Commons rules or laws, several high-profile politicians have slipped their cash through similar loopholes.

For example, work and Pensions Secretary James Purnell was criticised for turning an identical tax trick on his London second home in 2004. On selling this property he re-designated it as his main residence – and avoided paying capital gains tax on the profit. And like Blears, he claimed thousands of pounds in running expenses for this property.

But the first Labour politicians to become unstuck after trying to avoid tax was Peter Mandelson, who in 1998 managed to save nearly £4,000 on the purchase of a £249,000 flat in Notting Hill by doing a clever deal on the property’s fixtures and fittings, helping reduce its saleable value to under the then £250,000 Stamp Duty threshold. At the time friends of Mandelson claimed that he had negotiated a drop in the property’s sale price after it emerged that work would be needed, rather than using ‘fixtures and fittings’ to reduce its value.

The slide in property prices in famous-name London areas such as Belgravia, Canary Wharf, Chelsea, Hampstead, Kensington, Knightsbridge, Fulham and St John’s Wood is tempting over buyers from Europe, the Middle East and the US who know that much of London’s high-end property now represents a ‘bargain’.

For example, Knight Frank says prime residential prices in central London fell in October 2008 by 3.9 per cent, the fastest rate of decline on record .

“Up until the summer [of 2008] many vendors were holding to their pre-crunch asking prices,” says Liam Bailey, head of residential research at Knight Frank. “After what has taken place in the financial world, an increasing number of vendors have decided to cut prices to achieve a sale. Our index shows this trend clearly – with the rate of month-on-month price drops gathering pace.”

Independent prime London property consultant Charles McDowell (pictured) says that such rapid price drops are making prime London property attractive to many foreign buyers for the first time.

“Well-heeled buyers from Euro and US dollar-dominated countries are arriving in London by the private planeload, as this is currently the best buying opportunity for them in many years,” he says.

And who would blame them when, he says, “a superb home that may have sold last year for £10 million is now on the market for £8.5 million”.

But it’s not just falling house prices enticing foreign buyers over. For years Brits have been buying up swathes of Spain, France, Italy and the US on the back of a strong pound – but now the parlous state of sterling means buying in the UK is now up to 30 per cent cheaper for anyone using dollars or euros to buy property in the UK.

“This increased foreign interested is not only at the top of the London market – we are also seeing something of a run on London boltholes around the £1 million mark too,” says Charles McDowell.

“For Italians buyers, for example, London now offers an excellent opportunity to escape an unfavourable domestic tax environment, but was until recently not a realistic property option.

“And It will be interesting to see if the capital freed up in London remains here or is moved to the country market.”

The property market is set to bottom out this year with recovery set for early 2010, the leading lights of the property and finance sectors have concluded.

This glimmer of hope for millions of British homeowner facing a troubled market came during a meeting in central London of the great and good from a wide range of industries – including estate agency, banking, pensions and mortgages – to debate the housing sector’s woes.

Led by a panel that included Hugh Pym, the BBC’s chief economics correspondent and government housing advisor Kate Barker the meeting’s most lively moments came when debate began about a possible market recovery.

Held in a room within the Institute of Civil Engineers in a room named after – fittingly perhaps – the father of modern-day cement John Smeaton, members of the panel said that the bottom of the market would be reached this year and that it was “not wildly optimistic to see a recovery of some sort within six to twelve months".

But others were quick to point out that the improving conditions within the housing market that some agents and lenders have talked about recently are “green shoots with little or no roots” and that a more solid housing recovery will be quicker to establish itself.

The Great Housing Market debate took place at One Great George Street, just off Parliament Square and was attended by representatives from the world of finance including The Council of Mortgage Lenders, Morgan Stanley, the Bank of England,  including Halifax, Royal Institute of Chartered Surveyors, Office of Fair Trading, Barclays, John Charcol as well as estate agents Knight Frank, Douglas and Gordon, Marsh and Parsons, Savills and John D Wood.

The Stamp Duty holiday on homes bought for under £175,000 announced in September last year is to be extended for three months and will now expire at the end of the year, Alistair Darling revealed during yesterday's Budget statement.

This is aimed mostly at first-time-buyers who will continue to save £1,750 in moving costs – Stamp Duty used to be levied at the zero rate only on houses bought below £125,000.

Darling's announcement, which formed a billion-pound stimulus package for the housing sector, includes:

•           Money put aside to help restart work on mothballed housing developments.

•           Financial help for houses that have been built but cannot be sold – through joint-equity schemes and also by buying up failed but finished housing developments and converting them into council housing.

•           Cash for councils to enable councils to start building housing again.

•           Extra funding for the mortgage support scheme announced earlier this week.

The Conservatives have not made specific criticisms of the Stamp Duty relief extension, but David Cameron has attacked the extended debt the government is taking on to fund it – which is expected to push government spending up to £175 billion this year.

Peter Boton King, chief executive of the National Association of Estate Agents said: “Merely extending the stamp duty threshold is disappointing. Mr Darling had a real opportunity to get rid of this hated tax, which is seen by many as a tax on aspiration. Since the threshold was introduced last Autumn it has helped just one third of first time buyers.

“In this difficult economic time, Mr Darling could have seized the opportunity to encourage first time buyers to the market and to send a signal of confidence that may have reverberated around the economy.

“Instead he has tried to choose a path to please everyone, which I suspect will please no one.”

18 months of dropping house prices mean many more homes are now worth less than their mortgages, research reveals. 

Up to 900,000 homeowners are facing negative equity as plummeting house prices take their toll on the UK property market, it has been revealed.

Prices have dropped by 18 per cent from an average of £186,000 to £150,000 since November 2007 and this, the Council of Mortgage Lenders (CML) says, means more people now have mortgages larger than the value of their homes.

This is similar to the last property slump during the early 1990s but, although price drops then were less severe, the number of homes with negative equity was much higher at 1.5 million.

“Another big difference is that is it less concentrated among young, first-time buyers and more evenly spread across wider age groups and those at different points on the property ladder,” says Bob Pannell, head of research at the CML.

The problem also varies from region to region and the percentage of homeowners suffering negative equity is highest in the north (9.2 per cent), Yorkshire and Humberside (6.7 per cent) and the East Midlands (5.4 per cent) compared to the national average of 4.8 per cent.

So how big are the drops? According to the CML negative equity is currently a moderate problem. Two thirds of those with mortgages bigger than their property’s value face an average shortfall of £6,000 for first time buyers and £8,000 for home movers.

Homeowners struggling to make ends meet financially will be able to take a ‘repayment holiday’ on their mortgage via the government's new Homeowners Mortgage Support (HMS) scheme, Gordon Brown announced today – although the deal is no free lunch and comes with strings attached.

Eligible homeowners will only have to pay the interest on their home loans but must have bought their property before 1st December 2008, be owner occupiers (rather than landlords), hold mortgages under £400,000 and savings of less than £16,000 and have been paying their mortgage for five months in a row without default before running in to difficulties.

Also, the aid is only applicable in practice to two-income families where the main bread earner loses their job – as households must find the money to pay 30 per cent of the interest-only monthly payments, with the government chipping in for the rest.

“We know that many families are worried about how to pay the mortgage right now, and we’re determined to ensure there is real help available for them,” says housing minister Margaret Beckett.

“On top of the range of measures we’ve already put in place, this new support will help borrowers who just need a bit more time to get themselves back on their feet.”

The scheme has been rolled out quickly and with minimum fuss mainly through the government’s direct or indirect ownership of so many banks –Lloyds, Halifax, Bank of Scotland, Northern Rock, the Royal Bank of Scotland, NatWest, Ulster Bank, Bradford and Bingley, Cumberland Building Society, Clydesdale and Yorkshire Bank are all offering it.

Other lenders also climbing on board include Bristol and West, GMAC, GE Money, Kensington Mortgages, the Post Office and Standard Life Bank. All these lenders offering HMS will have the security of a government guarantee if the borrower defaults – however several lenders have said they will offer the scheme, but without the government guarantee; Barclays, Abbey, HSBC and Nationwide.