The housing stock of London's boroughs extends well beyond their council estates and includes thousands of "street properties", many of which have a high value. A recent report by think-tank the Policy Exchange proposed that, given the capital's housing shortage, when these "high value" homes become vacant they should be sold to build new, cheaper homes.
About 3.5 per cent of these homes fall vacant each year. The think-tank suggested that when they have above-average values, they should be sold. In London, this means one-bedroom flats worth £170,000 and four-bedroom homes worth more than £390,000 would be likely to go on the market.
In the past, councils have usually sold derelict properties when the cost of making them habitable would be too high. However, Southwark and Hammersmith and Fulham also sell properties in good condition, where they can expect a good profit from the sale.
Westminster City Council is also reviewing its approach. "We are doing a profile of our assets to see if we are using them efficiently," says Fergus Coleman, the council's housing development manager. "We may well decide that we should be selling more stock as it becomes available to help finance more and better homes."
Currently, only property in severe need of repair is sold by Westminster. It has a four-bedroom house in St John's Wood Terrace going to auction soon with a guide price of £1.6 million. It sold a studio flat in Maida Vale's Talbot Road recently for £400,000.
Keeping it simple
Jeremy Lamb, director of Andrews & Robertson auctioneers, says that investors are the main customers at auction, a method which is easier than using a private estate agent.
"They can be a good-value buy but you must be on the ball," he says. "We give notice of properties coming to auction two and half weeks before, so you need to get a surveyor fast and pay cash at the sale." Once the hammer goes down, the contract is in place and 10 per cent of the price must be immediately paid as a deposit — money that will be lost if the rest is not paid on completion.
Andrews & Robertson regularly sells properties for south London councils. Earlier this year, it sold a house in The Chase, just north of Clapham Common, for £1.4 million. In September, it sold two houses in Villa Road, Brixton, from Lambeth Council for £725,000 and £705,000. On December 17, it is selling a house in Grosvenor Park, Camberwell, on behalf of Southwark Council.
"Usually, the properties are in poor condition but when people are planning to do elaborate conversions, that is irrelevant," says Lamb. "Unmodernised property has often got its original features, which buyers like. There is actually quite a shortage of unmodernised property."
Brian Grant, an auctioneer with Barnard Marcus, adds: "You have cash buyers with a real desire to transform these old houses and create space with loft extensions and basements. Where councils remove period features, it tends to reduce the value."
Grant says it is worth knowing that councils are often keen to sell and complete sales by the end of the financial year in March to help balance books.
The scale of the challenge is often breathtaking. Allsop sold a house in Albion Drive, Dalston, for Hackney Council last week but the auction house advises: "Due to structural issues, no viewings will be possible on the first and second floors of the building. Viewers are advised to bring and wear hard hats and to exercise caution when viewing."
In the event the property sold for £1.12 million, though it had a guide price of just £250,000 to £300,000.
Garry Murphy of Allsop argues that councils should be encouraged by the strong demand for these properties. "Councils were buying up a lot of property 50 years ago in places where there has been huge gentrification since," he says. "Owner-occupiers will pay a premium for one of these properties." A former care home belonging to Lambeth Council will go under the hammer at Allsop soon. It is a 10-bedroom property in Calais Street, Camberwell, with a guide price of £820,000. An eight-bedroom property belonging to Haringey Council in Shepherd's Hill, Highgate, sold for over £1.3 million.
Housing associations sometimes sell homes in disrepair or where a sale would be exceptionally lucrative. L&Q has sold a couple of dozen in the past year — including 202 St Paul's Road, Islington, which went for £960,000.
But even when property sales are obviously justified, they remain controversial politically. "Some people don't realise that the money from the sale goes back into the council's housing budget," says Paul Mooney of Savills. "I really don't see what the objection is when a house is sold for a couple of million pounds and the proceeds are used to build a block of 15 flats. It is a way of providing more housing to those in need."
Among the properties he has sold was a house in Hyde Park Gate, SW7, which sold for £4 million to the Estonian Embassy. Mooney says that councils like selling by auction. "They know when the money will come in. With estate agents, you can fiddle around for ages."
Barnard Marcus: November 19 and December 18; Grand Connaught Rooms, Great Queen Street, WC2 (barnardmarcusauctions.co.uk).
Allsop: December 18, Park Lane Hotel, Piccadilly, W1 (allsop.co.uk/3/ auctions-home).
Savills: December 10, The Millennium Hotel, Grosvenor Square, W1 (auctions.savills.co.uk).
Andrews & Robertson: December 17, Russell Hotel, 1-8 Russell Square, WC1 (a-r.co.uk).