I was at a drinks party last week where a property lawyer showed me a post on Instagram.
Several others have sent it to me since including clients in America.
The “Reel” reported that prices in Mayfair were down 25%, Chelsea is down 18.2% and Belgravia is down 16.8%. The strap line was “The Non Dom Exodus is Real”.
Ugly news, indeed, although the “financial guru” who posted these stats didn’t seem to offer a source (I’m not on Instagram so haven’t seen what else he has posted). Clearly, London is on its knees… except I expect these figures come from the Office for National Statistics (ONS) and the way this data is collated has once again been ignored.
The figures are for the average value of properties sold in each borough. So, if there are fewer £10M+ sales, then this has quite a substantial effect on the average price of properties sold especially when transaction numbers are very low.
As there are considerably more £10m+ properties in these boroughs than any other district in the UK, this affects their figures more, hence the average value of property being sold in the whole of central London being down a more modest 4.6%.
Now, some will say that this shows weakness at the top of the market, so is still a valid indicator and I agree that it certainly highlights the fall in the number of £10m+ transactions.
But suppose we have a scenario where there are several large transactions this year which cause the average price of homes sold to increase 15% using the ONS method. Do you really think that it is a good indicator of prices jumping? Of course not. It’s just good for people who make money posting provocative headlines.
But for anyone trying to understand what is happening in the market, this sort of headline is poisonous because it is completely misleading. For example, there was an article in the Financial Times about a week ago that focused on Marylebone.
Marylebone is in Westminster. And according to figures from data analysts, Lonres, prices climbed 9.6% which is obviously very different to what the ONS reported above. Now you may be thinking that the Lonres analysis could be wrong.
It’s not wrong, but it is also misleading because it focuses on only one part of Marylebone. Other parts and even certain buildings and streets within central Marylebone will have performed considerably better/worse than this.
I know I bore on about this point but that’s because it is so important. when valuing and then negotiating on a property, you must have total clarity on what is happening to prices for the type of property you are buying. You must have accurate comparators – the stats you read in the press are simply too general to be of any use and are inevitably averages, so are hugely misleading and if you compare apples with oranges you will make an expensive
blunder by either overpaying or missing out on a great opportunity because you are looking at the wrong figures.
If you are planning to acquire a property in London and are open to finding out more about how to accurately value properties, find the best opportunities and negotiate the lowest price possible, email me at jeremy@mercuryhomesearch.com or call 02034578855 (+442034578855 from outside the UK).
Best regards,
Jeremy
