To renovate or not to renovate?
As renovators of character London proper- ties, we’ve seen the challenges that proper- ties owners have when selling their London home. We’re particularly noticing that ex- pats who bought homes several years ago and are now returning home are having difficulty selling their London property. Sales volumes are down substantially
over the past 10 years. In Kensington and Chelsea, where we focus our renovations business, sales volumes are down nearly 50% from 2006. Prices have been equally gloomy over recent years and you’ll have seen all the headlines about that. While 2018 price data shows signs of recovery, it’s properties that have been in the same pos- session for a few years that are suffering. Te lack of sales volume means that find- ing the right buyer willing to do work after buying the property is challenging. In a robust market, owner occupiers
snap up all of the properties that are ready to be occupied. Tat means some owner occupiers buy unmodernised properties, with the view of doing them up them- selves. Tese people compete with the ren- ovators and developers for this property stock and un-renovated stock can sell al- most as quickly as modernised homes. In a market with low sales volumes,
housing stock builds-up and owner occu- piers have a number of properties to choose from. Typically, they pick the homes that are ready to move in to, partic-
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ularly if they are moving to London with a job. Renovators and developers used to buy the un-renovated properties and do- up for a profit. But, in this economic cycle there’s a problem: stamp duty. Since stamp duty increased in 2014 and 2016, the transaction costs for buying and sell- ing properties have increased substantially. Buying a central London property for £2m will now incur up to £153,000 in stamp duty alone. When stamp duty is paid by renovators, they effectively pass on to the original owner, by offering a lower purchase price. As a result, the difference between un-renovated and renovated property prices is now so large that many sellers are choosing just to hold their property “until prices rise”, often leaving
The difference between un-renovated and renovated property prices is now so large that many sellers are choosing just to hold their property until prices rise.
their homes on the market for one to two years or more. An expat with an un-renovated London
property faces a problem. To sell now and take a very low price, or leave the capital in the London property and hope that the sale price rises. Renting out the property isn’t a great option either, with rental yields in some areas now nose-diving below 2%. With turbulent times ahead in the Brexit process and close to zero possibility of the stamp duty hikes being reversed, it’s diffi- cult to see an end to this situation. While this is great news for expats arriv-
ing in London, who get a rental property for amazing value, the expat homeowner looking for a sale is now stuck. Tat’s why we’ve been talking to homeowners about renovating their home to help it sell. Homeowners are in an ideal position to
renovate and sell their properties, provid- ing great homes to new arrivals. Transaction costs, like stamp duty, are re- duced substantially because there is only one sale to the eventual homeowner and no developer in the middle. So why don’t more home owners reno-
vate to sell? Tey tell us it’s a lack of time to manage a big project and reluctance to spend the money. Tose that attempt the renovations often tell us afterwards that they lacked the expertise and local market knowledge for what they initially thought was a straight forward job.
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