The prime London market is buoyant as ever
TALKING PROPERTY:LAST WEEK, I spent a few days manically whizzing around central London, visiting antiques fairs, auctions, wholesale suppliers and retail shops. With so many of our own interiors shops no longer in business, it’s like pre-boom days, when we were forced to buy items from ‘abroad’.
The Irish are prominent in the city and doing well, including the Doyle Collection of hotels, one of which is the recently re novated Kensington Hotel on Queen’s Gate, where I enjoyed a delicious meal in the Aubrey restaurant.
Unlike dear old Dublin, central London is alive and kicking right now, obsessed with all things patriotic and royal; in the throws of celebrating Queen Elizabeth’s Diamond Jubilee, while still basking in the excitement of William and Kate’s first wedding anniversary (and no doubt, hoping for news of the patter of tiny royal feet) – and, of course, making last minute preparations for the forthcoming Olympic Games.
This year there are tourists everywhere, as one might expect. In addition, smart areas of London have been attracting more than their normal share of international property investors, eager to protect their wealth by investing in sterling, for fear of a euro collapse.
Unlike the rest of the UK where prices have remained virtually static of late, prime central London residential property prices have been rising steadily over the last three years, since the post Lehman blip in spring 2009.
While all else around it has been suffering, this little pocket of London appears to be immune to the global recession: its prices have increased by almost 50 per cent (47.3 per cent), including a lift of 10.7 per cent in the first five months of this year alone.
In fact, luxury London property prices are now at an all-time high. They have exceeded their previous peak (in March 2008) by 12.1 per cent to date.
Sales in this sector continue to be strong despite the introduction of 7 per cent stamp duty on properties over £2 million in the budget last March and the slow-down in bank lending.
Naturally, this created a pre-budget spike in £2 million-plus sales, followed by a post-budget slowdown. To compensate, sales figures increased dramatically below this £2 million threshold, including for first-time buyers.
However, such deterrents mean little to super-rich international buyers. According to local estate agents including Knight Frank, eastern European and Russian buyers are still spending the most (average spend £6.2 million), followed closely by Middle Eastern and Asian buyers. And, when you consider that the average price in the Kensington, Chelsea and Westminster area is approximately £1.4 million for a two-bed flat, it is not too difficult to exceed the £2 million mark on a family home.
There are rising stock levels at the upper end (over £5 million) but a huge shortage of stock below this figure (the super-rich don’t need to sell), so, as demand has outpaced supply, buyers who might traditionally have bought property in upmarket areas such as South Kensington, Knightsbridge, Belgravia, Mayfair and St John’s Wood are being forced further west and south to areas such as Fulham, Earl’s Court, Battersea, Clapham and Putney.
However, the British government has also introduced a 15 per cent stamp duty for properties over £2 million owned by a “non-natural person” (a company or collective investment scheme) and there is talk of introducing a further levy on these properties and charging them capital gains tax, which may slow down the international investor market in time.
In the meantime, there is a fear that some of the cash which might have been spent on prime London properties might now revert to other European countries, where property prices are falling.
Liza-Jane Kelly, sales director at Marsh Parsons confirmed that she had noticed a small but significant number of Irish people selling their London properties in order to return home to Ireland, where they can now buy at rock-bottom prices.
However, as the prime London market is so international, one group leaving will just make way for another arriving – such as the French and Italians. Through lack of supply in their price range within the traditionally upmarket areas, they are having to move further out from the city, to such an extent that the French Lycée has opened a primary school near Parsons Green in Fulham.
But with the euro zone so unstable, anything could happen – and isn’t the property market in central London as vulnerable to change as anywhere else? Possibly, but historically this area has survived everything, including the last major UK property crash under Margaret Thatcher.
And so far, the European crisis is working in its favour. According to a recent Knight Frank survey, there was a significant spike in French web users viewing prime central properties last February, which coincided with Hollande’s proposal for a 75 per cent tax on top earners.
Like Britain’s Queen Elizabeth, the prime London property market is small but significant and doesn’t show any signs of being knocked off its top perch.
Isabel Morton is a property consultant