Mayfair

bringing residential life back to mayfair

Wetherell

Market Reportsummer 2017

bringing residential life back to mayfair

WITH 70% OF MAYFAIR RESIDENTIAL PROPERTY SUFFERING FROM INCORRECT INITIAL PRICING, THIS PRACTICE HAD RESULTED IN OVER £1.1 BILLION WORTH OF HOMES BEING MISPRICED OVER THE LAST DECADE.

This has resulted in slower sales; price reductions and reduced vendor and purchaser confidence, and could all be avoided.

Using LonRes sales data and local market intelligence, Wetherell have reviewed in detail the 1,047 residential sales that look place in Mayfair between 2007 and 2016. Of these, it was found that a staggering 245 were initially valued incorrectly and required a price correction to ensure a sale. Given an average unit value of £4.6 million, this means that over £1.1 billion worth of Mayfair property at current values has been priced incorrectly over the last 10 years.

An analysis of annual sales over the last 10

years reveals that when a Mayfair property is correctly priced it will

typically sell in 3-6 months;

The average home in Mayfair currently sells for £2,190 per sqft, with typical pricing of between £2,000 to £2,500 per sqft for prime property and £4,000 plus per sqft for ultra prime property. An analysis of annual sales over the last 10 years reveals that when a Mayfair property is correctly priced it will typically sell in 3-6 months; if it is incorrectly priced it will take 14 months to sell and will suffer a price reduction; and if it is underpriced it can sell in just 1-2 weeks but the vendor may have lost out on potential revenue, whilst the adroit purchaser will have found a “bargain”.

The proportion of incorrectly priced homes has risen to 70% over the last decade. Back in 2007 there were that year some 157 sales across Mayfair of which less than 5% suffered from a price reduction before they were sold. We calculate that in 2007 90% of the homes on the market were correctly priced; 5% were incorrectly priced and had to have a price reduction to ensure an eventual sale; with the balance of 5% underpriced and rapidly sold.

In 2011 there were 114 sales in Mayfair, however the number of incorrectly priced homes had risen to 22%, all of these having to have price reductions to ensure an eventual sale. In 2013 there were almost 140 sales, with the number of incorrectly priced homes now up to 27% of all transactions.

In 2015 there were 94 sales across Mayfair with over 40% being incorrectly priced and suffering a price adjustment to ensure an eventual sale. Last year (2016) 68 homes were sold across Mayfair, with almost 45% being initially incorrectly priced and having to have price adjustments prior to being sold.

As of late March 2017 there are currently 160 residential properties on the marketplace. Homes selling presently in Mayfair are on the market for an average of 281 days or 10 months; a figure clearly above the 3-6 month benchmark for correctly priced properties. This led us to estimate that just 25% of homes on the market at present are being initially priced correctly whilst over 70% are being overpriced and under 5% are being underpriced.

The price is right?

Correct initial pricing% of Mayfair properties sold after price reduction

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% -175

-140

-105

-70

-35

0

35

70

105

140

175

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

175

140

105

70

35

0 0%

10%

20%

30%

40%

50%

Number of Annual Residential Mayfair Sales

% of Sold Properties Reduced in Price Before Sale

Number of Sold Properties Reduced in Price Before Sale

Source: Wetherell Research / LonRes. March 2017

no-one knows mayfair better than wetherell

“The 70% figure for incorrect initial pricing of residential property across Mayfair has resulted in over £1.1 billion worth homes being mispriced over the last decade. Mispricing is deeply unhealthy and extremely bad for the good reputation of estate agency professionals who are experts in their local marketplaces. Mispricing leads to slower sales; price reductions and reduced vendor and purchaser confidence, and can all have been avoided.”

“Since 2007 Mayfair has out performed the rest of Prime Central London. Growth has been nearly 90% compared to nearly 70% for the rest of PCL. Wetherell expect Mayfair to outperform

the rest of PCL as new residential developments come on stream over the next five years placing the last piece of the jigsaw into the revival of Mayfair as London’s No.1 area.”

“It speaks volumes to us that 80% of the sales in Mayfair over 2015 and 2016 were handled by just two estate agents – Wetherell as the leading specialist boutique agent for Mayfair plus a leading corporate agent. Our local offices have highly experienced senior teams and a deep knowledge of the Mayfair marketplace. When Wetherell are instructed on a sole agency basis, or with another on a joint agency, the property is consistently priced correctly, marketed professionally and sold successfully.” “However, so many times over the last five years, we have taken on properties

which have previously been instructed with other agents or multiple agencies who have a far less knowledge of Mayfair or have slipped into a valuation “price war” in order to please the vendor and win the instruction, and the result has been mispricing and no sale. Eventually these instructions have come back to Wetherell to resolve. It is interesting to see reports from portals of increasing price reductions – this does not mean that values have come down; merely that the properties have eventually reached their correct marketing price and are in line with local comparables.”

It is caused by a range of factors, however the key driver is the rise in joint and multiple agency instructions, and the competition between traditional; property search and on-line estate agents for client instructions and business.

Twenty years ago, a vendor client in Prime Central London would typically appoint one estate agent to price, market and sell their property. This would allow the sole agent – normally an established local

market expert – to use their knowledge to price the property correctly based on their deep local knowledge of the property stock, recent comparable sales and the sentiment of potential buyers.

Gradually over the last 20 years, but accelerating over the last 10 years has been the rise in joint and multiple estate agency instructions, and in the last few years the emergence of property source and on-line estate agents. This has led,

we believe, to a rise in property advisers far less experienced in local marketplaces advising vendors on pricing or agents competing for new business and promising vendors unrealistic prices for their homes.

The evidence to support this is indicated by the fact that last year in Mayfair 45% of sales were multiple agency instructions – matching exactly the proportion (45%) of properties initially mispriced: the match is no co-incidence.

SO WHAT IS CAUSING THIS WORRYING RISE IN MISPRICING?

Peter Wetherell F.R.I.C.S.

Founder and Chief Executive

Robert Windsor

Developments Director

Mayfair: outperforms rest of prime Central London(based on flat sales)

0%

25%

50%

75%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Mayfair value growth since 2007 (%)

Rest of Prime Central London value growth since 2007 (%)

* Mayfair defined as W1J, W1K and W1S. Rest of Prime Central London: SW1A, SW3, SW7, SW10, SW1W, SW1X. CHART SHOWS GROWTH SINCE 2007 FOR EACH YEAR. E.G. 2016 BAR REPRESENTS GROWTH FROM 2007 TO 2016. Source: LonRes

no-one knows mayfair better than wetherell

102 Mount Street . London . W1K 2TH

T: 020 7493 6935 E: mail@wetherell.co.uk

wetherell.co.uk

WITH OVER 35 YEARS EXPERIENCE IN THE LOCAL MARKET AND NEARLY 55%

MARKET SHARE BY VALUE WETHERELL ARE THE LEADING SPECIALIST ESTATE AGENT BRINGING RESIDENTIAL LIFE BACK TO

MAYFAIR AS LONDON’S NUMBER ONE AREA.

© May 2017

Two bedroom lateral apartment on Davies Street providing 1,300 sqft of living space located within a contemporary apartment building constructed in 2004. The development is complete with porterage and underground parking. The apartment has a spacious reception room and two private balconies.

This instruction came to Wetherell in 2015. Originally the property was with another estate agent and had initially been priced at £6.25 million. Wetherell were instructed on a new joint sole agency basis and recommended that the price was reduced to £5.35 million in order to meet comparables. The property then sold for £4.925 million.

Two bedroom first floor apartment providing 1,083 sqft of living space, with a double reception room overlooking Chesterfield Gardens.

Wetherell met with the vendor and advised that the price should be around or below £2.5 million. The vendor was advised a price of £2.95 million by another agent, who was then instructed on a sole agency basis. After a period of being unsold, the property then became a multiple agency instruction, it remained unsold.

Then Wetherell was instructed, advised a price correction to £2.4 million, the property sold for £2.15 million.

Loft style duplex with vast reception room opening onto a private roof terrace on the upper floor and two bedroom suites, one with private terrace on the lower floor.

The instruction was originally a sole instruction with another agent priced at £2.85 million.

Wetherell were approached and advised a price of £2.3 million. The vendor adjusted the price to £2.525 million. The apartment sold for £2.1 million, which equated to the guide price that Wetherell provided.

SUPPORTING CASE STUDIES

Featured Properties with Price Reductions

Two Bedroom Apartment

DAVIES STREETMAYFAIR

Two Bedroom Apartment

CHESTERFIELD GARDENS MAYFAIR

Loft Duplex

CURZON STREET MAYFAIR

MOUNT STREETTwo Bedroom Lateral £6,750,000

UPPER GROSVENOR STREETWhite Stucco Fronted £6,000,000

PARK STREETTwo Bedroom Lateral £2,150,000

PARK STREETOverlooking Hyde Park £3,950,000