Rich Pickings - Market boom for prime and super-prime...

Investment returns and activity in London’s property market has been stronger than the rest of the country over the last 12 months, as the effects of the pandemic fade.

The rebound in the capital is driven by the relative value on offer, says Knight Frank.

While prices in prime central London fell 0.8 per cent between the first quarter of 2020 and the end of 2022, country house prices rose by 18 per cent over the same period, as successive lockdowns drove demand for space and greenery.

It has been the same story in the highest price brackets. The number of super-prime (£10m-plus) sales in London reached an eight-year high of 175 in the 12 months to November, whole-market data shows.

Meanwhile, the number of super-prime (£8m-plus) sales outside of London fell to 35 from 42 between December 2022 and August this year. The total amount spent outside of the capital declined to £527.5 million from £590.6m.

London super-prime sales are tracked independently so there is no three-month lag from the Land Registry.

There are two reasons driving London’s strong performance, says Rory Penn, head of London sales at Knight Frank.

“First, its enduring appeal as global ‘super city’ alongside New York, Paris, and Singapore – London remains front and centre on this list, Brexit or not. The other reason, often overlooked, is financial. Clients can buy a trophy home in most PCL postcodes at the same price, or lower, than around 10 years ago. London is showing genuine value at what could be the low point in a 20-year cycle.”

The last time there were more London sales above £10m was in 2013/2014, a period before the introduction of higher rates of stamp duty for properties above £1m.

Some £4.2 billion was spent on 225 properties in the 12 months to November 2014, which compares to £3.4 billion this year. Despite the stronger overall performance nine years ago, there were a total of 28 transactions above £30m this year, which matched the 2013/14 figure.

“International demand has remained resilient above £30m” says Paddy Dring, global head of prime sales at Knight Frank. “This has been helped by the weakness of the pound, the fact average prices above £10m are still 13 per cent below their last peak in mid-2015 as well as the emergence of more super-prime developments in London.”

Not that demand has been consistently strong over the last 12 months. The fallout from the mini-Budget at the end of last year and the negative impact of stubbornly-high inflation and fast-rising interest rates over the summer caused periods of subdued activity.

However, there has been a notable pick-up over the last six weeks as the UK economic outlook has improved, says Dring. Inflation is now less than 5.0 per cent, the best five-year fixed-rate mortgage has fallen below 4.5 per cent and speculation has turned from the size of the next rate rise to the timing of the next cut.

The most popular London location for super-prime transactions over the last year was Mayfair, where 29 sales took place. This was followed by Kensington (24) and Belgravia (23). Furthermore, in a sign the so-called ‘race for space’ is winding down, 38 per cent of sales in London were flats, a figure that fell to 30 per cent during the pandemic and compares to 40 per cent in 2019.