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London luxury property could soon emerge from pandemic slump

Our latest insight on the luxury property market in London, including how it’s fared through the Coronavirus lockdown and an area-by-area breakdown.

6 min read

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Unsurprisingly, activity in London’s high-end housing market dropped dramatically across April, May and June due to the coronavirus-caused lockdown. But the Coutts London Prime Property Index for Q2 2020 shows rays of hope for a turnaround.

-53.4%

Drop in number of properties sold compared to the same period last year

+1.8%

Rise in prime property prices since this time last year

760

Number of new prime properties put up for sale in Q2 – the lowest number since our records began

  • OVERVIEW

    LOCKDOWN TAKES TOLL – FOR NOW

    Sales of residential properties worth £1 million or more halved compared to the same period last year. And the number of new properties put up for sale – 760 – is the lowest figure we’ve seen since we started researching this market over six years ago.

    But Coutts Chief Investment Officer Alan Higgins, who wrote about the prospects for property post COVID-19 at the start of lockdown, says the outlook is promising. “Despite the deep recession as a result of the global health crisis, we retain our more positive view on London prime property which we adopted last year,” he says.

    “The key positive factors include relatively attractive levels of sterling for global investors, which make London property look cheap in dollar or euro terms, and the ultra-low interest rate structure worldwide.”

    A sign of the market standing up to the strange times we’ve seen this year is that the number of properties sold at a discount and the amount buyers are getting off haven’t risen. In fact, they’ve fallen. Sellers have already seen prices drop significantly since 2014 and are now digging their heels in.

    Stamp duty holiday should help spark turnaround

    The government’s recent changes to stamp duty, alongside the easing of lockdown measures, should provide another welcome boost to the market.

    Chancellor Rishi Sunak announced earlier this month a temporary holiday on stamp duty on the first £500,000 of property sales across England and Northern Ireland. It will run until the end of next March, saving buyers up to £15,000. No stamp duty will be paid on primary residential property sold for less than £500,000.

    Alan says these changes should “help improve the lower end of the prime market, encouraging greater activity and liquidity”.

     

    Fab for first-time buyers

    Katherine O’Shea, from the Coutts Real Estate Investment Service, says the stamp duty change should be welcomed by those looking to get their first foothold on the property ladder, and the parents who often step in to help.

    “This short-term measure obviously provides a great opportunity for all buyers and is a welcome development across the property market,” she says. “But it’s particularly good news for first-time buyers, who can struggle to come up with the money needed to get a property purchase over the line, and often need ‘the bank of mum and dad’.”

    She adds, “The government’s 3% extra stamp duty charge on second homes and buy-to-let properties, introduced four years ago, is still in place, but this new move should still benefit those buyers too.”

     

    Prices fall but are still up on last year

    Across the London luxury property market, prices have fallen -3% since the end of March and are down -12.6% compared to their peak in 2014. But they are still up +1.8% compared to the same time last year.

    As Coutts Homebuying Journey Manager Alex Lyneel explains, there are wide-ranging differences between price movements in different parts of the capital.

    He says, “Prices in prime central London have suffered more, whereas more traditional areas filled with family homes have held up quite well.

    “For example, prices in Knightsbridge & Belgravia are now -23% cheaper than they were in 2014, but prices in King’s Cross & Islington have reached their highest ever levels – at £1,041 per square foot. Meanwhile, properties in Hampstead & Highgate Hill are only -6.6% below their peak, half the average price fall.”

    “Prices in prime central London have suffered more, whereas more traditional areas filled with family homes have held up quite well.”
    Alex Lyneel, Coutts Homebuying Journey Manager
  • local insights

    Bargains for buyers in capital’s coveted postcodes

    Some parts of central London are now looking extremely cheap compared to their previous price levels.

    As well as the -23% price drop in Knightsbridge & Belgravia, prices in Bayswater & Maida Vale have fallen -19% from their heights six years ago.

    This could present a strong buying opportunity, particularly for overseas buyers who could benefit from the current weakness of the pound. That weakness effectively acts as a further price reduction for anyone using another currency to fund a purchase.

    And according to Ray Monaghan, Head of Coutts UK Treasury Services, it is likely to continue in the near future.

    “Sterling is currently unable to rally significantly against the other major currencies,” he says. “When markets flip to a more cautious, ‘risk-off’ mood, as they are right now, sterling generally tends to trade lower against major G10 currencies such as the euro and US dollar. Also, concerns around a post-Brexit trade deal between the UK and Europe continue to be a drag on the pound.”

    Meanwhile, while the number of prime properties sold at a discount overall is very low, there are pockets of opportunity in the capital when it comes to getting money off the asking price. For example, over half the luxury properties in Mayfair & St James’s and Pimlico, Westminster & Victoria are being sold at a discount, with buyers on average negotiating over 15% off.

     

    Sellers beyond central London stand ground on price

    Very few properties are being sold at a discount in some of the areas further out in London that are more focused on family homes. Demand in these areas is driven more by necessity as buyers look for more space, particularly those wanting to lay down family roots.

    Just 9% of properties in Battersea, Clapham and Wandsworth are currently being sold for less than asking price, and it’s only 10% in King’s Cross & Islington.

    The amount people are getting off asking prices in this type of area is also low. The average discount in Battersea, Clapham & Wandsworth is -4.4%, and it’s -4.6% in Wimbledon, Richmond, Putney & Barnes.

    The continued popularity of these parts of London is also shown by the fact that properties are selling relatively fast. Homes in Wimbledon, Richmond, Putney & Barnes typically take 120 days to sell, for example, compared to 166 days on average across prime London.

    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.

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

    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.

  • Interactive Map and Postcode Selector Tool


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

     

    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.

     

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