Property purchases are never a simple matter, but the prime value real estate market is in a world of its own.
Whether the individual is looking to purchase a residential property or an investment asset, there are a number of issues around financing and accessibility which set these properties apart from a traditional home purchase.
Accordingly, entering the market for a high-end property requires individuals to come to terms with the complexities of this type of transaction, as the impact of potential hurdles can accelerate rapidly beyond the scale of a typical property, owing to the higher value.
To avoid costly mistakes, prospective buyers should carry out rigorous due diligence and seek the insight of industry experts to carve out the best opportunities and ensure a seamless acquisition.
Tailored service is required
When it comes to standard residential properties, there is often a ‘one size fits all’ policy which helps grease the wheels of the broader property market.
After all, most properties can be directly compared in value and desirability to similar scaled properties in comparable areas.
In the case of luxury properties, however, it is unwise to anticipate a similar way of conducting and completing purchases.
Buyers must appreciate, as mortgage brokers do, that a tailored approach will be required through every stage of the process.
This is part of the fabric of a luxury property – with largesse and lavishness come unique negotiation challenges for all stakeholders involved.
Valuation, for instance, can be a significant obstacle. In properties of smaller scale, valuation can appear almost scientific, with masses of housing stock and a market with high transactional activity with which to settle on a credible value.
Luxury properties have fewer contemporaries to base valuations on and therefore come with greater complexity.
Factors such as location and size remain pertinent, though different issues arise; including security, access to local amenities, and the planning capacity for new owners to potentially redevelop elements of the property to better suit their needs or desires.
In this case, property valuation becomes less of a science, and more of an art. In turn, experts in luxury property will be needed to accurately assess a fair valuation.
It must be also be noted that the unique nature of high-end property can also pose challenges for surveying and conveyancing.
Generally, these properties will have non-standard design specifications and exist on a far larger scale.
This can serve to mask potential costly issues within the build, further obfuscating the true value of the property to a buyer.
Accordingly, it is crucial that buyers partner with experts at every stage in their purchasing process.
Expertise, naturally, does not come for free, but the initial investment will pay off in ensuring a reasonable valuation is in place, and in turn prime mortgage products secured at a rational value, with fewer headaches to consider down the line.
Premium mortgage products can be problematic
The simplistic, and unfortunately widespread view, is that wealthy individuals do not have to contend with the mire of mortgage applications and stress of delayed, protracted, or rejected processes to access necessary finance.
In fact, the more wealth an individual has, the likelier they are to have complicated financial arrangements.
This makes them a subject for a mortgage assessment, as the soundness of lending by traditional practices will appear diminished when compared to others with a consistent salaried income.
As a result, with many lenders unwilling to dedicate the necessary resources to untangling a complex web of finance, there are never any guarantees that a wealthy individual will be able to secure financing.
A surprising number of wealthy prospective buyers are turned away. Earlier this year, we commissioned an independent survey revealing nearly one in five (18%) high net worth individuals (HNWI) were turned down for a mortgage in the past decade.
Significantly, the problem lies not only in mortgage rejections; the majority of the wealthiest surveyed reported having to wait more than three months to hear if their application was successful – substantially above the national average for a mortgage approval.
Once again, it is wise to secure experts to afford HNWIs a more strategic and market-aware approach to lenders; working alongside prime property specialist brokers, and the lenders they trust, will also be critical in completing purchases promptly.
As London’s prime central market continues its pace of recovery and confidence returns, we may see a flood of new demand from wealthy investors with the return of both domestic and international buyers gathering momentum.
Partnering with specialist sector experts will, then, be critical in allowing this abundance of investment capital to flow smoothly.
Although prime property purchases can be a lengthy process, the right industry knowledge and experience will aid prospective buyers in navigating the complexities of this form of real estate investment.
Author: Alpa Bhakta is the CEO of Butterfield Mortgages Limited, which is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.
Butterfield Mortgages is authorised and regulated by the Financial Conduct Authority (FRN:119274).
Butterfield Mortgages Limited is part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited.