What is driving the demand for high-end homes in London?

As the UK property market continues to rebound from Brexit and the first national Covid-19 lockdown, London's prime real estate shows no signs of slowing down. Wealthy Brits are seeking outdoor space and modern turnkey properties, while the world's super-rich are snapping up homes via Zoom and Whatsapp

10 November 2020

M

ay you live in interesting times' is an old-fashioned curse, and a fearsome one. The past year has certainly been interesting – and possibly cursed. But the surprising conclusion as 2020 draws to a close is just how adaptable London’s top-end property market has been to the new normal.

Prices in prime central London have in fact held firm throughout the year, with pockets of buoyancy and some record sales: a treble-fronted, 62,000 sq ft white stucco mansion on Rutland Gate, Knightsbridge, owned by the Saudi royal family, was sold to Chinese businessman Cheung Chung-Kiu for a record £210m in January, in a deal brokered by Gary Hersham, founder of Beauchamp Estates. It followed what has been billed as the 'Boris Bounce', with the super-rich deciding that 2020 was the year to snap up luxury homes in London. 

In July, contracts were exchanged on 76 Park Street, one of Mayfair's oldest townhouses. The four-storey Georgian property had been rented out since 2018, after the owner failed to find a buyer. It was relisted just as the housing market reopened in May, with agent Wetherell, and purchased by a British Indian businessman for £4.85m. The house is close to his office and he intends to use it as a pied-à-terre. 

“Prime central London is a very healthy market at the moment,” confirms Guy Meacock, director of buying agency Prime Purchase. “We have been in a long, slow decline over the past five years, with Stamp Duty increases and most of all Brexit. The market is now looking like comparatively good value. During lockdown, people were stuck in their homes for months on end and they had the time to talk. It was the perfect call to arms.”

No 26 Old Queen Street, St James's, which sold in May for £15.45m, two days after the government allowed the reopening of the housing market; courtesy of Beauchamp Estates

“At the beginning of the year, we hadn't seen that much momentum since 2013,” agrees James Hyman, head of residential agency at Cluttons. “But then everything came to a halt in the second half of February when people began waking up to the severity of the global pandemic.”

The housing market completely froze during the first lockdown. It reopened in May and Stuart Bailey, head of prime London sales at Knight Frank, asserts it simply carried on where it left off: “Since the first lockdown ended, we have witnessed an upward trend again. This is still going strong six months later so it is more than just a release of pent-up demand."

His clients are predominantly British and what they want is outside space, a private front door and room to work from home. Apartments, particularly those without balconies, are a hard sell.

Giles Barrett, sales manager of Domus Nova who specialises in Notting Hill and Bayswater, advises that most of his buyers currently want turnkey properties. “There doesn’t seem to be much appetite for unmodernised homes,” he says. “Perhaps the idea of project managing in a lockdown scenario seems like too much of a risk.”

A four bedroom family home in Brackenbury Village near Hammersmith, for sale at £1,595,000; courtesy of Domus Nova 
A six-bed home in Notting Hill, for sale at £6.75m; courtesy of Domus Nova

The pandemic has, of course, had an impact. British buyers, on the hunt for traditional family homes with gardens, are in the driving seat, while international buyers are being forced to make multi-million-pound investments from thousands of miles away, viewing properties over Zoom and liaising with agents via phone and WhatsApp.

Overseas buyers have decreased in number, but are certainly not absent. In September, Savills reported that almost half of all homes (49 per cent) went to international buyers, notably from Western Europe and China. High net worth individuals continue to be attracted to the UK by the weak pound and the simple fact that a London property remains an essential component of a global property portfolio. Additionally, there are some bargains to be had: in May, one Hong Kong buyer picked up a modern lateral apartment in a mansion block on Park Street, Mayfair, in a deal brokered by Chestertons. The buyer’s offer of £4.825m (against an asking price of £5.35m) was accepted and they intend to use the property when visiting the capital.

Guy Meacock of Prime Purchase also acted for a young European couple who work in banking and, with young children, were fed up of renting and keen to put down roots. They paid upwards of £3m for a period house in Hampstead. “They recognised that lending rates are incredible at the moment, and they work in a bonus-driven industry,” he explains. 

Prime outer London is flying. According to data from Knight Frank, prices in Belsize Park rose by 3.2 per cent from July to October, with Dulwich, Wandsworth and Wimbledon also experiencing strong growth. A six-bedroom property on Calton Avenue in Dulwich, sold by Knight Frank, sold within a month for well above its asking price of £3.25m, after a bidding war ensued between three families. 

Calton Avenue, Dulwich, sold for upwards of £3.25m, courtesy of Knight Frank
A six-bed terraced house on Montpelier Square, for sale at £10.95m; courtesy of Chestertons

Charles Lloyd, senior director in CBRE’s private office, deals with ultra-high net worth individuals looking for superprime property in the £10m-plus bracket and has been approached by buyers looking to upgrade their London homes following lockdown. “They might have an apartment and didn't previously crave any outside space, they might have a townhouse with a small garden, or they might have somewhere very funky with an open plan design, which is not so cool when the whole family is stuck at home together all the time,” he comments.

Lloyd has been acting for one Asian client with a budget of £50m to £80m. They want a house with a big garden, a cinema and plenty of leisure facilities, "so that if we go into another strict lockdown they have everything they need at home." 

The level of buying activity has been enough to keep prime central London prices ticking over. Savills forecasts prices will drop a marginal 0.5 per cent over the year. On a more micro level, property analyst LonRes has identified a few prime postcodes which have outperformed this year. They include SW1A (St James’s), where prices are up from an average £1,909 per sq ft in 2010 to £2,744 this year.

Belgravia (SW1W) has also seen prices elevate, from £1,607 to £1,787 per sq ft, while in South Kensington and Knightsbridge (SW7) prices rose from £1,568 to £1,635. Soho and Marylebone have also defied a tumultuous year with price rises.

And what of 2021? Savills believes steady growth will resume in 2021, despite the end of furlough and the introduction of a new Stamp Duty surcharge on overseas buyers, and that by 2024 prices will be up 17.5 per cent.

And while predictions are hard in an unpredictable world, Lloyd is also optimistic: “It is very, very, dependent on a vaccine,” he said. “But there is huge pent-up demand from international buyers, who have not really been able to travel to the UK since March."