Main central London property market set to see price increases, writes Catherine Swindells
London’s prime and super-prime property market experienced a ‘short-lived Boris Bounce’ after the 2019 general election, says Frances Clacy, associate director of residential research at Savills. But the Tory victory, which eased concerns over the consequences of a Jeremy Corbyn premiership, came after several years of falling house prices in the capital, Brexit and stamp duty being among the market slowdown factors.
In 2020, the pandemic led to a brief but total suspension of the UK market, as well as a further drop in prices. But, last year, things started to improve. From January to October 2021, there were 398 sales of London properties of £5million or more, with a combined total value of £4.1billion – the highest volume and value of super sales -prime in the city since 2014.
“For most of last year, there was a question mark over places like New York and London, the big global city markets,” says Liam Bailey, global head of research at Knight Frank. “But the desire for people to come together hasn’t gone away, and apparently never will, so I think people have probably been too negative about cities for too long, and they’ve been wrong, and people are income.”
Several leading agents are also reporting growing demand in the prime and super-prime rental market, where competition is amplified by a significant shortage of supply. According to analysis from Knight Frank and LonRes, the number of rentals listed for £5,000 per week or more in the third quarter of 2021 was down a third (31%) from the level it had reached in the same period in 2020. In fact, the number of super-prime properties available to rent is the lowest since 2016.
“On the lettings side, the market has been absolutely crazy and ridiculous,” says Sabaya Verger, partner at Tedworth Property which focuses on Chelsea, Knightsbridge and Belgravia. “Everything flew off the shelves. And people will pay more for properties that are finished to very high quality standards, especially in the very high end market.
So far, the rally in selling prices has been modest, bringing the market back around its “Boris Bounce” level. But the growing demand for luxury homes in the capital suggests that 2022 may be the best year for London’s main market over half a decade.
Frankish Knight expects 7% growth in London’s average high-end property prices in 2022. That would see it overtake cities like New York and Paris.
“Part of central London tends to do well during times of inflation, which is what we’re looking at right now,” says John Waters, director of Robert Bailey Property, who has 18 years’ experience in the center from London. real estate market. “I just wonder if it will be tempered by the other risk factors globally. There is still a bit of a way to go before the world opens up and business is back to business as usual.
Roarie Scarisbrick, partner at Property Vision, believes that UK capital remains attractive for international UHNWs, notwithstanding certain risk factors. “Everyone’s eyes are on us – London still seems to be very attractive to a lot of people as a safe and pleasant place to live, have as a base or store their money. But they won’t like it if they’re heavily taxed.
“London is a bubble and will be forever,” says Verger. “Every millionaire or billionaire you meet owns property in London.”
Overall, Knight Frank expects Miami to be the city with the best performing real estate market. It should build on an exceptional 2021 with growth of 10% in 2022.
The record glut of M&A activity seen in 2021 is expected to drive price growth across the globe as entrepreneurs and executives cash in on major deal deals. Refinitiv’s analysis found that as of November 23, 2021, global M&A value in 2021 was already the highest on record for a single calendar year, up 39% for all of 2019.
This is already having a ripple effect, says Jo Eccles, founder of buying agency Eccord. “The boom in M&A activity has created significant demand for properties in the £10-20m range as entrepreneurs who have experienced liquidity events seek to invest their earnings.
‘We’ve also seen great interest in trophy assets – best-in-class properties worth £40million or more – which are seen by UHNWs as a safe place to park considerable sums and which serve protection against high inflation. .’
Giles Hannah, executive director of residential development at the Red Sea Development Company, agrees. “Supply issues remain for the trophies. This will lead to higher demand and higher prices in 2022,” says Hannah, who plied her trade in the upper end of the London market for several years before taking on an international role in Saudi Arabia. “The majority of UHNWIs internationally and domestically have essentially enriched themselves during the pandemic. There is now the emergence of a new generation of young billionaires linked to technology and e-commerce who are also looking to buy or rent in central London.
Hannah notes that – for both sale and rental – demand is particularly strong for “penthouses, contemporary homes with elevators and private gardens, and those set in gardens with houses in the back for their staff maintains the main residence safely”.
Knight Frank’s longer-term forecast calls for prime London real estate growth of 18% and central London of 24% over the next five years.
“We expect Central London to be the best performing region in the UK,” says Clacy of Savills. “When we saw this mini-bounce at the start of 2020, it showed that central London was ready for its recovery, and that has just been put on hold by the pandemic. So he’s definitely behind his time in the spotlight.
However, not everyone is convinced. Independent purchasing agent Nathalie Hirst resigns herself to the lingering uncertainty linked to the pandemic. ‘Who knows?’ she asks. ‘It’s impossible to predict. I think anyone trying to do that is a fool.