Mayfair property to plummet as wealthy struggle for credit
Used Ferraris being sold at half price at one London dealership
The most expensive properties in London's most exclusive postcodes have lost a third in value and have further to fall as would-be buyers are refused mortgages from their banks, according to a leading property agent.
Charles McDowell, a Mayfair-based property agent who runs his own company, said prices of some properties worth £5m (€6.1m) or more in Knightsbridge (SW1) and Mayfair (W1), have already lost a third of their value and could lose 50% in coming months, as recession tightens its grip on the wealthy.
He cited an example of a senior partner at a City of London law firm who wanted to buy a £4m flat last month but was refused a loan by his bank.
Others that have succeeded in selling their properties have had to plump for a deep discount on the sale price. He knows of someone who bought a property for £7.5m last year, was forced to sell for £6.5m recently.
"The problem is, the most expensive properties in areas such as Mayfair and Knightsbridge were the most overvalued during the golden years, and so had the most to lose. In the boom time the £5m-plus properties were being bought with the the help of substantial amounts of leverage, which would-be buyers simply can't get hold of now."
McDowell says properties in Kensington and Chelsea, while usually worth less in absolute terms than properties in Mayfair and Knightsbridge, have been the worst hit by percentage of value lost. However he cited one example of a property that was bought for £10m in Kensington and Chelsea in 2007 which is now valued at £5.5m
"A year ago a banker might have thought, 'I can't really afford a place in Brunswick Gardens (in Kensington) but I'll get it anyway.' Nowadays the wealthy are buying less and at a fraction of the price."
While not the most expensive areas in London, Kensington and Chelsea are the most aspirational for many bankers, according to McDowell. Many have splashed out on the properties in the past after large bonuses.
Jeremy McGivern, who runs London-based high end agent Mercury Homesearch, agrees with McDowell's predictions. "The mortgage companies are no longer lending against bonuses, and no longer selling tracker mortgages, which means a large proportion of last year's property buyers are out of the picture," he said.
He added that a client had recently sold a property in Belgravia, near London's Sloane Square, for 33% less than its value last year.
The Royal Institute of Chartered Surveyors released a report yesterday saying the figures for house sales have hit record lows. In the three months to October, 6.4 sales were made per estate agent in London.
And it's not just prime London property prices getting the chop. Sales of sports cars such as Ferraris are also being pinched. McDowell says if anyone was to go into the Ferrari dealership in Mayfair and offer £30,000 in cash for an approved used Ferrari, which would normally retail for £75,000, the car keys would be handed over.
Mayfair Prestige, a dealership which sells the Ferraris, confirmed it was selling cars at knock-down prices.
However, at the margins the wealthy are clearly still spending money. During the interview at private members club The George Club in Mayfair, business was booming and the restaurant was full of clients, including British actor Hugh Grant, paying over £30 for a main course,
McDowell is bearish - he thinks it could be at least five years before the value of top end homes in prime London regain the giddy heights of the beginning of 2007.
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