Purchase Prophet

If you live in Fulham, you’re probably aware that house prices here have shot up at a remarkable rate over the last few years. Average asking prices across the local borough, which includes Hammersmith, are 8.2 per cent higher than this time last year according to Rightmove’s house price index, and numerous streets in Fulham have gone up considerably more. Take for example the fully extended upper maisonettes on Wardo Avenue and Danehurst Street, which now sell for around £800,000 as opposed to £650,000 back in mid-2011. That’s a 23 per cent rise in eighteen months, or about 15 per cent a year, making them one of the best returning property investments in the area and quite probably the UK. So the question is, what does the market have in store for us this year, and if you’re looking to profit from it, what strategies can you employ?

Wash, Rinse, Spin
Casting our minds back over the last few years, a pattern emerges that we expect to be repeated this year. In the first three months of the year prices step up between 5 and 10 per cent, fueled by the annual round of City bonuses landing in buyers’ pockets and the wave of property that hits the market every January and February. This is peak season for the sales market. Over Easter the market pauses for breath, and the average buyer’s enthusiasm begins to wane as people take time to reflect on the first quarter’s gains and consider what might happen during the rest of the year. New year optimism is replaced by concerns about the overall direction of the economy, which can lead to a variable market over May, June and July. The general election in May 2010 compounded this effect, and will do again in 2015. August is a quiet month as everyone disappears for the summer holidays. Finally, prices over September to December plateau in the run up to the Christmas.

Selling in 2013
Considering this cycle, the best time to put your house up for sale is in January or early-February, in order to catch the regular influx of newly flush buyers. Getting a record price happens when you’ve got several buyers competing for your property, and this is most likely to occur during the first three months of the year. Don’t leave it too late though, as you risk drifting into the Easter doldrums, which arrive early this year at the end of March. Aside from January, shortly after Easter is the next best time to hit the market, followed by early September when you’re likely to catch the mini-boom in enquiries that hits after the holidays.

Buying in 2013
If, like most buyers, you have at least one eye on the return your new home could give you, what should you be looking out for in 2013?

Well the most popular strategy is to buy something with ‘extension potential’, meaning there’s potential to extend the internal area of a property by adding rooms in the loft, a side return, rear extension, pod room, basement or combination of these. Adding internal space above ground to a property anywhere in Fulham is certain to increase your eventual resale price over and above what the building works cost, but there’s a catch or three lurking here.

Firstly, extension potential massively increases the level of interest in a property. Try to buy anything with extension potential in Fulham nowadays and you’ll quickly discover you’re competing with several, possibly dozens, of buyers at least one of whom will be willing and able to pay well over the odds to secure the deal. If you’re a cash buyer you’re in with a chance, but anything over a 50 per cent mortgage and you can pretty much forget it, unless the auction room has been kind to you.

Secondly, there really aren’t many properties with extension potential coming to the market each year. If you focus your search exclusively on these it inevitably means spending longer out of the market, time which your money could have been working for you. Finally, if you succeed in picking up something requiring extension, you’ll shortly find yourself plunged into the minefield of actually doing the planning and building work. Sure, this is where you’re making your gain, but it’s easy to underestimate the time, cost and disruption to your life associated with completing the works. In many cases buying somewhere requiring only internal refurbishment could be a better bet.
So what’s the alternative? We suggest a more modest approach, aiming to acquire something that is likely to experience natural capital growth as opposed to relying on extension. Concentrating on finding property with the best potential for capital growth, rather than that with extension potential, frees you to participate in a larger market where your return is likely to be at least 10 per cent a year, possibly considerably more. Check out the graphic to the right for some real life examples from last year.

So what should you be looking out for? Over the next two to five years we see potential for 10 per cent plus per annum capital growth in the following hot spots. Of course this is just a rough guide. If you need advice on something specific feel free to give us a call.

Large Flats | Buy at: £450k to £700k
Purpose built Victorian flats with their own front doors such as those on Danehurst Street and Wardo Avenue have experienced extraordinary gains over the last couple of years and are now starting to feel expensive, but there’s plenty of potential left on nearby Lambrook Terrace and Bronsart Road. Those down on Edenvale Street and Althea Street will also experience a big boost when the Barratt Homes development of Sainsbury’s is completed in the next few years. Having your own front door is the real key here, as it makes these flats appeal to more affluent buyers who once upon a time could have afforded a small house.

Small Houses | Buy at: £800k to £1.25m
Look out for smaller houses (1000-1350 sq ft) on prime streets asking under £1.25m, a part of the market that has been heavily over subscribed of late. Those on Epple Road, Pursers Cross Road, Bishops Road, Gironde Road, Bloom Park Road and Horder Road should be of particular interest, as – in our opinion – they will continue to see market beating capital growth over the next few years.

Prime Houses | Buy at: £1.35m to £1.75m
Larger houses (1600-2000 sq ft) on prime streets remain great buys if you choose wisely. Be ultra picky about the exact location and clued up on realistic market values before you buy. Pay particular attention to the price per square foot to ensure you’re not getting fleeced. Houses within 500m of Parsons Green tube should be top of your list. St Maur Road is a prime spot with capital gain written all over it. Ackmar Road, Rosaville Road, Elmstone Road and Harbledown Road have also been consistently under-rated, and as such are likely to out-perform the rest over the next few years.