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Coutts London Prime Property Index | Q3 2017

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More prime London properties are selling than last year but prices have fallen to 2013 levels. There is hope for sellers though as the price decline is slowing.

6 min read

Welcome to our first edition of the Coutts London Prime Property Index (CLPPI). This provides quarterly insights into the prime (£1m-10m) and super prime (over £10m) residential property markets across 15 areas and 60 London postcodes – from Hampstead in the North to Wimbledon in the South West.

Use the map and postcode selector below to see how your area performed last quarter.

  • CHAPTER 01

    OVERVIEW

    The London property market has faced a number of challenges in recent years. Fear of a property bubble was the prominent theme in early 2014 and, since then, there have been two general elections, two stamp duty land tax changes and a vote to leave the European Union.

    All these factors have generated uncertainty in the market and, as a result, prices across prime London property are now 11.8% below their 2014 peak. In effect, prices are now back to 2013 levels with average quarterly growth close to zero.

    Our latest research shows that prices fell by 0.3% in the third quarter of 2017 compared to the same period last year, indicating the decline is slowing, but discounting on prime properties remains prevalent at an average of 9.3% on the asking price.

    Looking forward, while concerns over Brexit and the oversupply in luxury new builds remain, we expect prices across prime London to stay broadly flat over the short term. For investors looking to make short-term gains we suggest caution. In our view, the best case scenario is low positive returns, with the worst case scenario leading to negative returns – once taxation and other transaction costs are factored in.

    We have also seen the length of time prime property spends on the market before being sold increase by 3.4% year-on-year, at an average of 153 days. This is likely to affect the prime property market in two ways going forward: further discounting (albeit asking prices are often over inflated as they still reflect 2014 prices before prime property values declined) and the additional risk of property being withdrawn from the market, impacting the supply of stock available for prospective buyers.

    Our research shows that the impact of recent fiscal and political changes has hit sales volumes over the last few years. The number of properties sold dropped dramatically by 37.9% and 36.9% in the prime and sub-£1m London property markets respectively between the first and second quarters of 2016.

    Although prime sales volumes have regained momentum over the last 12 months, this is not the case in the market below £1m which has shown very little recovery. Fiscal changes affecting buy-to-let landlords are likely to be the main driver for this fall in buyers’ appetite.

    The ability to access the London property ladder varies dramatically between boroughs. While 70% of Richmond residents and 59% of those living in Barnet own their property outright or have a mortgage, over 60% of people in the central London boroughs of Kensington & Chelsea and Westminster rent the property they live in.*

    Source:
    *ONS Annual Population Survey, All price bands

  • CHAPTER 02

    Prime North London

    Performance across prime north London markets is mixed. For example, Hampstead and Highgate have not seen the same price fluctuations as King’s Cross & Islington or St John’s Wood, Regent's Park & Primrose Hill.

    Prime properties in the leafy suburbs of Hampstead & Highgate saw a 2.8% increase in price between the third quarter of 2017 and the same quarter last year – well above the other prime North London areas.

    Although prime properties sold in this area constitute less than 5% of the overall volume of prime property sales in the last quarter, sales were down 26% compared to the same quarter last year. Property prices continue to be heavily discounted, particularly in the £1m-£2m bracket (on average 8.0%). This will make sellers nervous and, as such, we may see a shortage of stock coming to the market over the next few months as vendors avoid selling at heavily discounted prices.

    St John’s Wood, Regent’s Park & Primrose Hill have all seen a particularly large drop in prices – a 9.9% fall compared to the same quarter last year. Buyers in this area are also insisting on reducing the asking price, with an average discount of 11.4% seen in the £2m-£5m bracket.

    However, the combination of good schools, parks and transport links to the West End, City and Canary Wharf mean this area will continue to be attractive in our view. American expatriates constitute the largest migrant population by country of birth in this area*, drawn notably by the American School in London located in St John’s Wood.

    Regeneration and redevelopment around King’s Cross have attracted international blue chip office tenants such as Google, Louis Vuitton and Universal Music to the area, while neighbouring Islington is London’s most densely populated borough**. Although prime property prices increased by 28.5% since the start of 2014, price growth has reversed recently and is now down 1.9% compared to the same period last year.

    Sources:
    *Office Of National Statistics
    **Greater London Authority

  • CHAPTER 03

    Prime Central London

    Central London areas have seen the most pronounced price fluctuations over the last four years.

    Known for its classical architecture and timeless appeal, Mayfair & St James’s are characterised by the “scarcity” of residential properties because of the large number of businesses based there.

    With fears of the market becoming overheated, buyers who would normally have only considered these postcodes have been forced to look further for value. As a result, Mayfair & St James’s property prices have cooled significantly, falling by 25.4% between the peak in 2013 and the recent trough in the second quarter of 2017.

    Prices improved over the third quarter of this year, but remain 3.8% below what they were a year before. The weakness in sterling, together with the fall in prices, means that euro and dollar denominated buyers stand to make significant savings. This could lead to a renaissance in activity even as Brexit uncertainties still loom.

    Chelsea’s fall in prices since 2014 has been less pronounced, reducing by 15.9% between the peak in the second quarter of 2014 and the latest trough in the first quarter of 2017.

    However, prices in this area have been relatively flat for the last five consecutive quarters. With a mix of art-deco styled apartments, Georgian houses, mews houses, Victorian red-bricked blocks and modern apartments, Chelsea boasts significant international appeal.

    Effectively, over half the population in the Royal Borough of Kensington & Chelsea are non-domiciled in the UK, with the highest proportion from the US, France and Italy*. As prices stabilise at an average of £1,640 per square foot, we expect buyers’ sentiment to improve also.

    Fitzrovia & Marylebone have performed relatively well compared to other areas within prime central London with prime property prices up 31.2% since 2013 and 4.6% compared to the same quarter last year. Marylebone in particular has seen overspill from Mayfair and the area also benefited from regeneration close to Tottenham Court Road station and the new Elizabeth line (opening December 2018). New boutique developments in Marylebone and Fitzrovia have also had a positive impact on prices.

    Source:
    *ONS

  • CHAPTER 04

    Prime West & South West London

    The performance seen across prime West & South West London markets shows that prime property prices in this area are recovering from peak values.

    From high-end grocery stores to picturesque mews – all fairly close to the river, Fulham & Earl’s Court have all the attributes of a popular base for young professionals and are often seen as overspill areas from Chelsea. As a result, the difference in price for prime property in Fulham & Earl’s Court and Chelsea continues to narrow. The impact on sales volumes as a result of the latest recent stamp duty change has been less pronounced in Fulham & Earl’s Court. Quarterly transaction volumes are now just above the four-year average, but property is on the market longer before selling, a 4.1% increase on last year.

    Another hotspot for young professionals, as well as families, is Battersea, Clapham & Wandsworth which boasts a resident population five years younger than the UK average* and one of the lowest council tax rates in London**. Historically much less expensive than the neighbouring Fulham & Earl’s Court north of the river, the price differential between the two areas has become much less pronounced over the last few years.

    With over half the area made up of green spaces*** and 33% of its adult residents cycling at least once per month****, the green borough of Richmond-Upon-Thames is one of London’s least densely populated areas*** and provides commuters with an attractive compromise away from the central London buzz. Dominated by families looking for more space, access to good schools and open parks, the prime market in Wimbledon, Richmond, Putney & Barnes has also seen price fluctuations over the last three years, but recovered well in terms of prices and sales volumes. The area saw a 39% increase in transaction volumes compared to the same quarter last year.

    Sources:
    * GLA Population Projections and ONS
    ** Department for Communities and Local Government
    *** Greater London Authority
    **** Department for Transport

     

  • CHAPTER 05

    Super Prime

    This year’s Sunday Times Rich List found that there are now more billionaires living in the UK than ever before. With London at the epicentre, how has London’s super prime (£10m+) market been performing?

    Our latest data on super prime shows that sales volumes are 26.8% below the three-year average. While prices are up 10.5% on the same quarter last year, they are 6.2% below the three-year average. Super prime property is on the market for longer, 223 days on average, 25% higher than last year’s figure.

    Compared to other price bands, the super prime market has seen the highest percentage of stock reduced in price at 46.7%, compared to 41.1% in the £1m - £2m price bracket. Our latest data shows that the average discounts achieved for super prime property is 15.0%.

  • CHAPTER 06

    Methodology

    The Coutts London Prime Property Index (CLPPI) tracks quarterly change in average sales prices in prime (£1m-£10m) London residential property since 2013. It encompasses 60 postcodes grouped in 15 separate distinct areas. Data is provided by LonRes, a leading provider of real time information to London’s top residential professionals. LonRes uniquely tracks the London housing market from the moment a property comes to the market to the moment it is sold or let, giving us up-to-date and location-specific information on the market. The charts displayed in this article show indicative values as reflected by the CLPPI. The CLPPI provides a representation of the change in quarterly prices on a 100 basis, which may not reflect the actual change in price in % terms as quoted by LonRes. The Index covers the following areas defined by the following postcodes.

    Area

    Postcodes

    Battersea, Clapham & Wandsworth

    SW11,SW4,SW18

    Bayswater & Maida Vale

    W2,W9

    Chelsea

    SW3, SW10

    Marylebone, Fitzrovia & Soho

    WC1,WC2,W1C,W1H,W1U,W1G,W1D,W1B,W1F,W1T,W1W

    Fulham & Earl's Court

    SW6,SW5

    Hammersmith & Chiswick

    W4,W6

    Hampstead, Highgate, Barnet & Haringey

    NW3,N2,N6

    Kensington, Notting Hill & Holland Park

    W8,W11,W14

    King's Cross & Islington

    N1, N5.N7

    Knightsbridge & Belgravia

    SW1W,SW1X

    Mayfair & St James’s

    SW1A,SW1Y,W1J,W1K,W1S

    Pimlico, Westminster & Victoria

    SW1P,SW1V,SW1H,SW1E

    Wimbledon, Richmond, Putney & Barnes

    SW19,SW13, SW15

    South Kensington

    SW7

    St John's Wood, Regents Park & Primrose Hill

    NW8,NW1,NW1W

Key Takeaways

The number of prime property sales in London is up but prices have tumbled to 2013 levels since the second quarter of 2014. The price decline is slowing though. The new Coutts London Prime Property Index gives a unique insight into the latest trends in the market across 15 key areas in the capital.

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