Hannah Aykroyd: London is a city determined not to be defeated
November 2021 - PrimeResi
Buying agent Hannah Aykroyd talks us through the key trends at play in the PCL market, why foreign purchasers are choosing to return, and which properties and addresses are at the top of the wish list…
After the shock Brexit result, there was a level of apprehension around whether foreign property owners would want to sell and get out of the market, coupled with concern that London would be less appealing to foreign buyers – happily neither proved to be the case.
Whilst Covid meant that for the most part foreign buyers were physically prevented from entering the UK to look for and acquire property, everyone waited to see what the sentiment amongst this demographic would be once restrictions eased. In the meantime, as domestic buyers started to reevaluate their lives and specifically their work/life balance and how that would impact their homes, there was a surge in demand for big family houses with gardens in London’s most sought after addresses – notably Notting Hill, Kensington, St John’s Wood etc.
What we have seen in the past months is a steady increase in enquiries from overseas and more recently, a healthy level of foreign buyers returning to the prime London market. A testament to the enduring appeal of London – a city with enviable education and health care systems, a rich cultural heritage and a wonderful and constantly growing choice of restaurants, cafes and bars.
LonRes data highlights the ever popular areas of Notting Hill and Kensington as 2% higher than the latest peak of June 2014, although this will be even greater for those best in class houses on key roads backing directly onto the communal gardens. This is one of only two areas of Prime Central London to have exceeded the latest peak, the other being Hampstead which is notably green with a desirable village atmosphere. The biggest factors in play here are the enduring appeal with very limited stock levels coupled with strong demand from an active domestic market. Conversely, the biggest declines are in areas such as Knightsbridge and Belgravia which are lagging at 23.3% below the latest peak, which is no surprise given these are predominantly international buyer focused areas.
Pre-pandemic, our client base consisted of 30% domestic and 70% international, which flipped during the crisis with the domestic, private client market stepping in to replace the ‘lost’ overseas buyers. Of those international buyers we were representing, we were mainly carrying out remote purchases on their behalf. Given a bigger influx of international buyers since travel restrictions have lifted, we are now weighted at c. 50/50, which makes for a more interesting mix of searches from large apartments in the super-prime schemes and residential block investments, alongside the ever popular large family house market in the Royal Borough of Kensington & Chelsea, Primrose Hill, St John’s Wood and Regent’s Park.
For many UHNWs, the wealth creation has been significant during the pandemic, and what has become more important to them is lifestyle and being more selective about how they wish to spend their time The effects on supply chains and spiralling costs have influenced certain clients as to whether to buy a turn-key or unmodernised property. For many UHNWs, the wealth creation has been significant during the pandemic, and what has become more important to them is lifestyle and being more selective about how they wish to spend their time. Given the unknown factors and costs involved in a large project, which could easily take 3-5 years from acquisition, many are preferring a turn-key solution. This can be either a recently refurbished house, albeit these are currently thin on the ground, due to fewer developers being prepared to take the risk of building out a trophy asset in a fluctuating market. Equally, there is increased appetite for the premium apartments with large terraces in the best super prime schemes with some notable recent sales, such as those of two penthouses at Chelsea Barracks amongst others.
For many buyers looking to carry out a project, appointing an excellent team with expertise in project management is key, as timeframes are often being extended due to a variety of factors; many of the boroughs are taking longer to approve planning applications due to staff shortages, supply chain issues and lack of good quality builders due to increased demand. Any delay results in increased cost and all of this should be factored in when negotiating on the property to ensure you at least come out net, save the stamp duty which you would hope to recoup over a 10-year hold.
The only dampener continues to be severe stock levels of best in class property, which clearly restricts movement in the market across all price brackets.
Looking forward to Q1 2022, the numbers of inbound international buyers should continue to steadily increase as travel restrictions ease further, whilst we feel domestic appetite will continue at the same levels if not increase. With interest rates predicted to rise and many people wishing to purchase ahead in order to safely fix for a five-year term, we predict this as another factor in increasing buyer demand. The only dampener on this continues to be severe stock levels of best in class property, which clearly restricts movement in the market across all price brackets.
In summary, we feel the heat is yet to come out of the market and any buyer should be prepared to act proactively and assertively to secure their preferred property in what will likely be a competitive situation. What remains clear is that London is a city determined not to be defeated.
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