Gazumping rears its head in London

Gazumping has returned to the top end of London’s property market, estate agents say, as buyers compete aggressively for a limited supply of properties in the most sought after locations.

Estate agents have reported an increase in cases of gazumping – where a vendor rejects an accepted offer in favour of a higher price – involving prime and rare properties in areas such as Mayfair, Belgravia, Knightsbridge, Kensington and Chelsea.

According to research from Marsh & Parsons, the estate agency, there was an average of 14.3 applicants per property in January, the highest level of competition since March 2010.

Mohamed Nurmohamed, director of Chesterton Humberts’ Mayfair office, says prime development properties and lateral apartments above the ground floor are attracting the highest competitive bidding.

“Properties with unique features such as attractive outside space, gardens, and spectacular views – or very high-specification trophy assets with a real ‘wow’ factor – are increasingly experiencing competitive bidding,” he explains.

Charles McDowell, a London-based property consultant, says he has seen two of his clients gazumped at the last minute this year. One case involved a house in Chelsea where his client had offered £8.5m, but was later gazumped at £9.2m.

“Gazumping is absolutely coming back, right across the price ranges at the top end of the London property market,” he says.

According to Matthew Morton-Smith of Savills Knightsbridge, the trend is down to the lack of good housing stock on the market, and the fact that some buyers are extremely motivated to secure particular properties.

Overseas buyers are also adding to the gazumping trend as they can be willing to secure a property at any cost. Favourable exchange rates have given them increased buying power, explains Nurmohamed.

As a result, many top-end buyers are now demanding “exclusivity periods” of 10 to 21 days to exchange contracts on properties where competition is likely or where the price agreed represents good value for money.

Vendors often request non-refundable deposits, typically of £10,000 to £50,000, as an indemnity for abortive legal costs should a buyer pull out, but Nurmohamed says he is also seeing buyers requesting the same – in case the seller pulls out or in cases where gazumping is likely to occur.

Sealed bids, which estate agents use in periods of high demand to extract the best price from competing buyers, are also featuring more in top property sales.

However, property experts point out that the return of gazumping cannot be compared with the frenzied, bull market activity seen at the peak of the housing market.

“It’s confined to a few of the very best houses and flats, of which there are precious few,” says Roarie Scarisbrick of Property Vision, the buying agent.

Scarisbrick says the best way to avoid a gazump is to exchange contracts fast. “Buyers should do everything they can to prepare before making an offer – or they risk being left exposed,” he says.