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Coutts London Prime Property Index | Q1 2020

Our latest review of property prices in the London prime market suggests they were looking up before coronavirus brought everything to a halt.

3 min read


Rising prices, falling discounts and increased activity suggest that the London prime property market was picking up before the coronavirus outbreak brought everything to a standstill.


Growth in prices during Q1 2020


Annual price growth over the last 12 months – 6.1% of this growth came in the last two quarters


Average discount between asking price and sale price, the lowest we’ve seen since the index began

  • Overview

    2020 builds on the positive momentum of the end of 2019

    While the quarterly increase of 1.3% wasn’t quite as dramatic as the 3.1% in the previous quarter, it shows that the momentum established at the end of 2019 continued at the start of 2020.

    Prime property prices in London were up 6.6% on the year before. Significantly, 6.1% of this growth came in Q4 2019 and Q1 2020 – during the six months that saw the Conservatives victorious in the UK general election. Markets were more active and buyers were becoming more competitive – sales volumes were up 4.9% and discounts between asking price and selling price narrowed to -9%, the lowest we’ve seen since the index began. Across prime London, 43.6% of properties are now sold at a discount to the asking price. 

    Katherine O’Shea, of Coutts Real Estate Investment Service, says, “Increased activity in the more traditional prime markets was a big driver of growth last year. For example, prices in Knightsbridge & Belgravia grew by 8.7%.

    “In Q1 the market seemed to be creeping up once more,” she said, “but we’re still -9.9% below the 2014 peak. With lockdown stalling markets for now, the question for buyers has to be, will the positive momentum carry on after restrictions are lifted?”

    Gross yields have remained stable for the last five consecutive quarters and currently stand at 3.9%. Gross yields in more central markets – where prices are more elevated – are still hovering around 3%.

    Market closes down as coronavirus spreads

    Perhaps the most interesting figure is the number of prime properties under offer across London. This stood at 673 at the end of the quarter, an increase of +30.1% compared to a year ago and the highest figure we’ve seen since our index began.

    Katherine explains, “This looks like a clear sign confidence had returned to the market at the start of the year, following the general election. But it’s also an early indicator that deals were being put on hold after the coronavirus containment measures took hold and the market started to close down.”

    Transactions – and therefore data for our survey – came to a halt at the end of the quarter. As we enter Q2, it remains to be seen if the trend will continue or if the coronavirus outbreak will make a longer-term dent in the market.

    Until we know how long the current situation will last and how it will alter the domestic and global economy, it will be difficult to predict what might happen next. The prime market is usually the first to show signs of recovery and should be a good barometer for the general property market.

    “Increased activity in the more traditional prime markets was a big driver of growth over the year. For example, prices in Knightsbridge & Belgravia grew by 8.7%”
    Katherine O’Shea, Coutts Real Estate Investment Service
  • Prime property recovery on hold, not cancelled

    Chapter 02 

    Special feature: Prime property recovery on hold, not cancelled

    After lockdown measures were announced by the UK government at the end of March, most estate agents closed their high street offices, face-to-face viewings stopped and the government urged people not to move house as part of the measures.

    While this has put the prime property market on hold, the elements that led to a rebound haven’t gone away:

    • Renewed political certainty after the general election
    • Limited supply creating competition among buyers
    • Weaker sterling, combined with the additional stamp duty for overseas buyers coming next year, creating short-term incentive for non-sterling buyers
    • Historically low interest rates – which have fallen further and are likely to be lower for longer

    These factors are unrelated to the current crisis and likely to come back in to play when the world goes back to normal.

    In the immediate term, however, there are a number of issues that could end up having a more enduring affect.


    Valuations have ceased

    Physical valuations – where lenders visit a property to confirm the lendable value – more or less ceased at the end of March, as most valuers were instructed to pause their visits.

    While desk-top valuations are now becoming common for lower value properties, prime property lenders are still considering the best way to support applications already in the pipeline. This will delay outstanding transactions, and potentially lead to deals falling through.


    Lenders reconsidering their offerings

    Given the economic impact of efforts to contain the outbreak, lenders are re-assessing the levels of risk they are willing to take on. As a result, a number of them have reduced their maximum loan-to-value (LTV) ratio – effectively reducing the amount they are willing to lend.

    The Bank of England’s reduction in the base rate has put margins under pressure in some products. Many lenders have pulled short-term, base rate-tracker mortgages or increased rates to continue providing these products to clients in the current rate environment.

    Coutts remains dedicated to supporting clients throughout this period. Homebuying proposition manager Alex Lyneel says, “Coutts has been supporting clients for over 300 years, helping them through difficult times when needed. Despite the current circumstances, we’re continuing to offer high levels of service for our clients.”


    Transaction volumes falling

    When the market starts moving again, pre-existing deals will either continue as normal, fall through or be renegotiated.

    In the short term, we expect prime property transactions to be delayed, notably in prime London where listing times could extend beyond the average 172 days seen this quarter.


    Prime prices likely to hold

    The lower end of the market may be subject to falls due to employment levels and market sentiment, but prime markets tend to be more durable and likely to hold up if the lockdown is lifted in the summer.

    Unlike the global financial crisis of 2008, this is not a credit crisis. Borrowers are not structurally over-extended and measures on affordability introduced since that crisis will have done their job to provide a buffer.

    Therefore, we don’t expect a rash of forced sales that would drive prices down. However, we may see more deals under offer renegotiated as a result of uncertainty in current market conditions, which could introduce some negative pressure on prices.


    Rebound likely to continue as outbreak recedes

    The factors that revived the London prime property market at the end of 2019 remain in place through the crisis, albeit in abeyance. In particular, a lot of pent-up demand was released after the UK general election in December that has not yet been fully satisfied.

    Rob Cohen, managing director at valuation firm MJ Group, says “Our data suggests that before the coronavirus outbreak, the top end of the market was underpriced, compared to previous historic highs, the market was in rebound and sentiment was good. If the lockdown exit strategy is managed effectively, with transactions getting back to more normal volumes during the summer, there’s a chance that the market could pick up from where it is now.”

    The pound also remains at historically low levels, making London a very attractive market for non-sterling investors. The government’s announcement that it would impose an additional 2% stamp duty for non-residents in April 2021 is also generating interest from overseas buyers keen to transact before the deadline arrives.

    With interest rates even lower than before the crisis, and likely to remain low, the income stream from property looks even more attractive. Financing will remain cheap, and we may also see the number of products and LTVs available expand. Longer term, this could see the London residential market’s status as a safe haven for money maintained and potentially enhanced.

    There are still many unknowns, of course, around how the outbreak will play out. We could see changes in work and living patterns that have unforeseen long-term impacts on residential property.

    Coutts UK chief investment officer Alan Higgins recently considered the possible consequences for commercial and residential property investment in a longer piece, Coronavirus: The broader impact – Property.

    In the meantime, we’ll continue to monitor the data on prime property to see how the market reacts.

    Helping you buy your home

    Coutts can help you find your dream home anywhere in the UK.

    We can introduce you to professionals experienced in finding property to ensure you are aware of a host of suitable opportunities – both on and off the market.

    Our agents are skilled negotiators who aim to secure property on the best available terms and place you, whenever possible, in a ‘preferred purchaser’ position.

    Coutts also offers a range of flexible lending options tailored to your situation.

    To find out more, speak to your private banker or wealth manager, or call Coutts 24 on 020 7957 2424.

    Your home or property may be repossessed if you do not keep up repayments on your mortgage. 

    Over-18s only. Terms and conditions apply. You may not be eligible for all Coutts mortgage solutions. Security may be required.

  • Local Insights

    Chapter 03

    Local Insights

    Knightsbridge & Belgravia shows strongest annual price growth

    Prices were up by 8.7% over the last 12 months in Knightsbridge and Belgravia, compared with an average rise of 6.6% across all areas. Sales volumes also increased, up 27.8% compared to the same period a year ago.

    New listings were up by 50.0% compared to a year ago, but overall stock levels remained quite low and the number of properties available for sale is also down, -11.6% lower than last year. This suggests that new properties that came to market were quickly snapped up by buyers.

    While prices are improving, they’re still -18.7% down on the peak of 2014.


    Transactions rising but remain below the long-term average

    Transaction volumes showed a modest increase of 4.9% compared to a year ago, but they are still -27.3% below the average since our Index began.

    Three areas are over -60% below the level of transactions in the 2014 peak: Marylebone, Fitzrovia & Soho (-60.8%), Mayfair & St James’s (-63.2%) and Hammersmith & Chiswick (-71.4%)


    Mayfair the centre of super prime

    Mayfair & St James’s had the most super prime sales in the first quarter of 2020, closely followed by Chelsea and Hampstead & Highgate.

    International buyers, who largely dominate the super prime market in London, have less than a year before the additional 2% stamp duty for non-residence is introduced. The data for super-prime properties is small, and for this reason it can be difficult to draw conclusions, but prices and transactions have both risen more quickly than the prime sector this quarter. And while we don’t collect data on the nationality of buyers, anecdotal evidence suggests increased interest from international clients.

  • Postcode Selector Tool

    Chapter 04

    Interactive Map and Postcode Selector Tool

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

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