London’s super prime residential market continues to show signs of recovery, according to the latest data.
There were 43 GBP5million-plus sales during April 2021, the highest April figure since 2014, said real estate advisor Savills.
More GBP5million-plus sales were recorded in the first four months of 2021 than in any year since 2014, the firm reported.
Rising luxury property transactions chime with a wider backdrop of a buoyant UK real estate market driven by the ‘Boris bounce’ after the 2019 election result, the resolution of Brexit, a cheaper currency for foreign buyers and an extended zero stamp duty holiday for properties up to GBP500,000.
“Prime central London values looked ripe for recovery in early 2020 after five years of price falls which left prices around 20 percent below peak,” said Frances Clacy, Savills research analyst. “The pandemic put that on hold but does not appear to have dented the appeal of the city’s very best residential real estate despite the additional 2 percent surcharge for all overseas-based buyers,” she added.
A new stamp duty tax introduced on 1 April means international buyers now pay an additional amount equivalent to 2 percent of the purchase price.
Overseas investors who already own another property anywhere in the world are also liable for a separate 3 percent surcharge, which sees 5 percent added to standard stamp duty levels. For investment or second home properties worth more than GBP1.5 million that takes the top rate up to 17 percent – one of the world’s highest marginal rates on property transactions.
Frances Clacy, Savills research analyst
According to Clacy, buyers are calling the “bottom of the market” and acting on the perceived value.
“This is particularly true of domestic and UK domiciled buyers, who’re able to take advantage of the low levels of competition from overseas buyers until travel corridors reopen,” she said.
Savills forecasts prime central London property price growth of 3 percent this year and 7 percent in 2022, with total growth to the end of 2025 expected to reach 21.6 percent.
Ready-to-go demand
According to Alex Christian, director at Savills Private Office, most international buyers are looking to buy ‘turnkey’ properties in the super prime price bracket, which has led to a shortage of freshly-turned out, ready-to-move in luxury properties in central London.
Despite London’s hefty stamp duty fees, given the foreign currency advantage there is around 15-20 percent extra value to be gained for international buyers which is helping to buoy demand, he said.
Alex Christian, director at Savills Private Office
“While there has been a lot of Middle Eastern interest in prime central London property, we’ve seen that most enquiries are turnkey only; these buyers don’t want properties that require work,” Christian said. “Domestic buyers might be able to stomach some cosmetic work, but there is no chance of Middle Eastern investors buying tired flats. They want properties that are done up and have outside space.”
According to the Savills expert, there are very few single developers buying and doing up super prime properties because of the high initial outlays involved.
“Only the most courageous are doing so,” he added.
One such investor is Tristan Parker, founder and CEO of PCL Property Group. The company acquires, reconfigures and renovates houses and apartments to a high, turnkey standard to meet the demand of buyers. It says 90 percent of its buyers above GBP10 million “do not even want to put a paintbrush on the wall” and want turnkey properties ready for immediate use.
Tristan Parker, founder and CEO of PCL Property Group
Parker said there was “unprecedented demand” for homes costing GBP10 million or more in areas of the capital including Knightsbridge, Belgravia, Mayfair and Kensington and Chelsea.
“It is clear that house prices are going to rise substantially over the next few years in prime London,” said Parker. “This year is going to be the comeback year – we haven’t seen such momentum since 2014.”
High net worth individuals continue to be attracted to the UK by the weak pound and the fact that a London property remains an “essential component” of a global property portfolio, he said.
“There is huge pent-up demand thanks to the pandemic, and we’re seeing buyers from new places like Argentina, Morocco and Turkey coming into the market. We are also seeing UK buyers who have moved out of London wanting to come back post-Covid. Having spent a year locked down, they have found that they rather miss people, shops and restaurants and are looking again at central London,” said Parker.
Lennox Gardens, Knightsbridge
PCL, which launched in March this year, is looking to raise GBP100 million of equity in order to acquire rare and unique assets within prime central London. The company is specifically targeting properties in need of refurbishment in London’s most prestigious streets and garden squares in Knightsbridge, Belgravia, Mayfair and Chelsea.
The latest property on PCL’s books is 26 Lennox Gardens, Knightsbridge – an uber-luxurious 5,280 square foot property with interior design by 1508 London – which is on the market for GBP26 million.
“We’ve already shown this property to a Middle Eastern investor and we expect more Middle Eastern interest,” said Parker.
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