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Coutts London Prime Property Index | Q1 2018


We look at the latest trends in the London prime property market. Find out what's happening in your part of the capital with our postcode selector.

5 min read

In our latest edition of the Coutts London Prime Property Index (CLPPI), we look at how prime London markets are performing so far this year and discuss what’s next for the capital’s residential property market.


Annual change in quarterly sales volumes


Annual change in price


Annual gross letting yield

  • Chapter 01


    Price drops and discounts may tempt buyers back to the market

    Prime London residential property prices took a dip in the first quarter this year, falling 3%, reversing the up-tick seen in the last quarter of 2017. Prices appear to be bumping along the bottom of the market, 14% below 2014 peak values. For the rest of the year we believe prices will remain flat, although volatility may come as the effects of Brexit become clear and the market continues to adapt to stamp duty land tax changes.

    Sales volumes take a hit

    Sales volumes fell 19% over the last quarter. They are 24% down compared to a year ago and almost 33% below the 2013 figure.

    Low interest rates – and therefore mortgage rates – mean that for the time being sellers are able to ride out the storm and wait for conditions to improve. As a result, sellers are either withdrawing from the market or turning to the lettings market.

    Sales are also taking longer to achieve, with sellers requiring six months on average, acting as a brake on sales volumes.

    Despite the headwinds for sales volumes, there is a healthy volume of stock under offer across prime London markets - a 22% increase compared to the previous quarter – and we expect sales volumes to pick up again next quarter.

    The buy-to-let market, meanwhile, is feeling the effects of the increasingly unfavourable tax regime, low yields and limited capital growth prospects. This can be seen most keenly in the under £2m market, where we have seen the most significant fall in transactions.

    Discounts on the rise

    53% of prime property on the market is being sold below asking price, compared to 42% last year. Prime property buyers can now expect to achieve an average of 12.1% off the asking price, equating to £0.3m on a 2,000 square foot property. In this example, discounts would range from c. £155,000 in Wimbledon, Richmond, Putney & Barnes to up to £0.6m in Mayfair and St James’s.

    Buyers beware of down valuation risk

    The flipside of discounts is that we have seen 40% of valuations marked down by surveyors in the last 12 months (often referred to as down valuation risk), with 19% of these down-valued by 10% or more. This can be a major headache for buyers relying on a mortgage to support the purchase.

    At Coutts, we work closely with clients to prevent deals from being scuppered by down valuations. Our focus is to design the most efficient lending solution for a client’s needs and their circumstances – however sophisticated these may be. In down valuation situations, it’s also important to have access to a range of flexible and customised solutions like those offered by Coutts. We have strong relationships with valuation surveyors so can often get an indication of market value before a transaction progresses. We also see clients renegotiate with agents following down valuations, securing a better deal as a result.

    At Coutts, we recognise that property is the most significant asset many of us own. We will take the time to understand your objectives and build the right team to help you make informed property decisions. We are able to design a lending solution tailored to your needs, or provide access to Coutts pre-selected panel of leading UK residential buying agents, who can source some of the most exceptional UK residential properties.


  • Chapter 02

    Opinions that matter

    Two experts at the front line of London prime property discuss the latest trends.

    Camilla Dell | Black Brick

    Managing Partner and founder of one of London's largest independent property buying consultancies, Camilla has 17 years' experience in the London property market. Her consultancy has successfully sourced and acquired nearly £1 billion of residential property for private clients.  

    Alex Michelin| Finchatton

    Co-Founder and Director of Finchatton, a luxury development company based in London. Finchatton has designed, managed and financed over 60 major development projects around the world and completed over 75 private commissions, worth in excess of £1.2 billion. 

    Q) How will property prices in prime London markets perform over the next five years?

    Camilla Dell: There’s an old joke that if you ask two economists a question you get three answers. The same can be said about London property analysts and their price forecasts.

    Part of the problem is that there isn’t one London property market, but many markets divided by area and price bracket with different supply and demand forces.

    That said, the general trend we see is for fairly limited growth over the next five years. We used to advise clients buying London property as an investment that they should expect to take a five-year view. Now, we’ll tell them to expect to hold on to the property for more like 10 years. Given high transaction costs, if an investor can make back their stamp duty in five years they’re doing well.

    Alex Michelin: The market will move sideways for the next 12 months but after that we see a slow and sustained recovery in prices.

    Trump’s election and the weak pound encouraged buyers with a US dollar income to consider London as a safe investment and we expect this to continue.

    In the short term, we expect some disruption to the normal order of things because of Brexit. However most of the buyers we speak to maintain that their reasons for being in London – quality of life, language, education, business opportunities, culture and rule of law – remain unchanged.  

    Q) Who is buying in London and what challenges do they face?

    Camilla: We are seeing continued interest from Middle Eastern buyers, with Saudi clients particularly active. Brexit notwithstanding, the UK offers political, economic and legal stability.

    Saudi buyers tend to value confidentiality and favour trophy properties. In the current market, few of those are marketed publicly. Around a third of the properties we bought for clients last year were sold off-market. That makes good connections vital.

    Continued issues around affordability mean that a growing number of parents are buying properties for their children too, or at least providing financial support.

    Alex: Buyers are out there. Despite some of the wider press commentary on the state of the market, it has been an encouraging start to 2018 for us and we have seen a number of high value residential transactions across our schemes in Knightsbridge and Mayfair.

    Although interest rates are at historic lows, mortgage regulations introduced in 2014 have constrained the ability of buyers to borrow at many multiples of their salary and this has held back demand.

    Other challenges for international buyers include the new Capital Gains Tax regime which taxes them at a higher rate on any gains they make on UK property than in previous years.

    Q) And the opportunities?

    Camilla: Given London’s diverse market, there are always opportunities to beat the market. For example, we believe there’s value to be had in Bayswater, sandwiched between Mayfair and Notting Hill.

    Alex: London property has historically outperformed returns from almost all other asset classes.

    We expect this to continue from 2019 onwards. However, it is not that easy for everyday investors to access property investment opportunities and transaction costs are high.

    Q) Which London areas are likely to be the new development hot spots?

    Camilla: Major investment is underway to transform Queensway, including a £1 billion investment in Whiteleys to give the former department store a new lease of life.

    Meanwhile, prices could jump along Old Kent Road if the planned Bakerloo Line extension sees new tube stations opened in the area.

    Alex: Mayfair has so far defied the negative sentiment in the rest of the market and actually seen some price appreciation. We also believe Notting Hill is still a hidden gem.

    We believe that “best in class” will always outperform – by that we mean the best properties, with the best aspect in the best locations and finished to the highest standards.

    Q) What are the latest features going into new developments?

    Camilla: New developments will always appeal to certain buyers – overseas buyers, wealthy students and older buyers seeking security and comfort. But some high-end developments have huge service charges.

    As well as the usual facilities you would expect, service charges pay towards the communal leisure facilities such as swimming pools and gyms, treatment rooms and screening rooms for the sole use of residents.

    However, an increasing number of our ultra high net worth clients spending more than £20 million don’t actually want to use gyms and swimming pools which are not for their own exclusive use.

    Alex: Service, service and service are paramount for purchasers. They want to have the luxury of a life well managed. The Finchatton project, Twenty Grosvenor Square, will be the first standalone Four Seasons private residences anywhere in the world.

    Security is also of increasing importance to people and buyers typically want to purchase in buildings with a concierge 24/7. Intelligent security – security which is integrated into the design of the building so you don’t notice it – is also a must.

  • Chapter 03

    Local trends

    Sales slowdown spreads to suburbs

    The slowdown in transaction volumes is now rippling out to other prime markets away from the centre of the capital.

    Suburban areas like Hammersmith & Chiswick and Hampstead & Highgate have seen the largest falls in sales activity this quarter compared to the same period last year, down 59% and 46% respectively. These markets are struggling with a distinct lack of good quality stock for buyers.

    Richmond, Wimbledon, Putney & Barnes is one of the main suburban prime markets to buck this trend, though, with sales activity up 43% this quarter compared to the same period last year.

    At the top of the market (£10m+), transactions in Q1 2018 were centred around Kensington, Notting Hill & Holland Park, closely followed by Chelsea and Knightsbridge & Belgravia.

    Prime central London leading the flight to quality

    In the centre of London, the Mayfair & St James’s market continues to grow. Average prices for prime property now stand at £2,299 per square foot in the area. This is an increase of 2.0% on last year and is now 15% higher than the area’s closest rival, Knightsbridge & Belgravia. Prime sales volumes in Mayfair & St James’s have remained steady while the time it takes to sell a property has almost halved, signalling a strong appetite from buyers flying to quality.

    Prices fell compared to this time last year in Hampstead & Highgate (-7.7%), Hammersmith & Chiswick (-6.2%) and Wimbledon, Richmond, Putney & Barnes (-5.4%). However, Battersea, Clapham & Wandsworth bucked the trend with prices up 6.1% compared to the same period last year, tracking towards to peak value again. Sales activity in this area was positive too, up 21% compared to the same period last year.


    “The flipside of discounts is that we have seen 40% of valuations marked down by surveyors in the last 12 months”

    Discounts present opportunities in key areas

    Discounting remains prevalent across the prime London market. Buyers in Bayswater & Maida Vale, Pimlico, Westminster & Victoria and King's Cross & Islington are negotiating the highest discounts, over 14% on average.

    In Bayswater & Maida Vale, prices have remained relatively stable for the last 18 months despite these high discounts. Prices have also remained steady in Chelsea which will provide certainty to buyers looking in the area.

    Strong rental yields in King's Cross & Islington

    Average gross letting yields (across all price bands and excluding new build properties) have held steady in most areas in the past quarter, with the largest increase seen in Marylebone, Fitzrovia & Soho (+0.4% to 3.4% average gross yield in Q1 2018). London property investment is often perceived as a means of diversification rather than yield-driven, but it is worth noting that King’s Cross & Islington currently offers a gross rental yield of 4.6%. This is the highest in London, and no surprise given Islington is the capital’s most densely populated borough.

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  • Chapter 04

    Interactive Map & Postcode Selector Tool

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

Key Takeaways

London prime property prices are down and likely to remain flat for the rest of the year. With more than half the capital's high-end property being sold below asking price, buyers can expect discounts of about 12%. Sales volumes are also currently down as sellers wait for conditions to improve.

About Coutts Real Estate

With significant experience in the real estate market, Coutts real estate experts draw on a clear understanding of our clients' property investment objectives, extensive connections and expertise to provide a consolidated service that meets their needs.

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