Last year there was extensive coverage in the press with regards to the
growing number of properties in
London and UK being owned by wealthy foreign nationals. The outrage for the
majority was that the properties were being bought solely for investment
purposes, leaving the property vacant with the owner having no intention of actually
taking up residence.
This was seen as being largely unfair to residents of London who are
being priced out of the market where they live and work, it has also opened
another unexpected avenue: The short term ultra-luxury
rental market.
Commanding between £15k and £85k a week, these properties have been
converted using interior designers, architects and basement
conversions to create jaw dropping luxurious wonders to target
the super-rich.
Investment
Historically the idea of a basement space would conjure up images of a
modest room used mainly as a ‘man cave’ or relaxing living area. However, a
quick internet search highlights the juxtaposition between these ultra-luxury
rentals and the stereotype; big, bright and airy spaces used for home living, storing
wine or even a basement
swimming pool.
The logic behind the decision to build downwards to create greater
amounts of space is a wise one. The homeowner can capitalise on the investment
made in the property location by multiplying both its rental and resale value
through the creation of additional space.
Experts have been quoted as estimating that by spending £300 per square
foot on a conversion that the likely yield could be as much as £2,000 per
square foot at the point of sale. A significantly better return on investment
than what is currently available from the housing market.
Controversy
It is unsurprising that the media has recently been awash with stories
of controversial super-basement conversions in London. Both Mr
Hunt, founder of Foxtons estate agency, and Mr
Dyson of the vacuum cleaner dynasty, have struggled with planning permission due
to new legal and governmental
stances being taken in relation to underground spaces.
As in the case of Mr Hunt, who is attempting to build next to the French
ambassador’s official residence, large excavation is required causing months of
sound and air pollution close to densely populated residential areas.
Cases like these have led to ongoing public debates surrounding these
‘iceberg’ homes. The construction not only causes disruption to the owners, but
also to neighbours as the construction is unfortunately not contained to the
underground space.
Future
It is not just London that is experiencing
this boom in basement conversions. There has been a 9% increase
in the last two years across the whole of the UK, particularly in areas with
high house prices.
‘With house prices on the increase, especially in
places like London and the South East, it makes sense that British home owners
are doing everything they can to their properties in order to maximise space
and value,’ 1
What was previously seen as a recession defying tactic to avoid losing
money on a property, is now being used as the best option to significantly
increase the value of property.
It will be interesting to observe whether or not this level of growth
increases significantly in areas outside of London where house prices and stamp
duties continue to creep upwards. It may become evident that building downwards
is the way to move upwards in the housing market.
1. http://www.propertywire.com/news/uk/basement-extensions-becoming-popular-uk/
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