UK
LONDON RESIDENTIAL MARKET INSIGHT By Nicholas Barnes, Head of Research at Chesterton Humberts
Chesterton Humberts are a multi-disciplinary property business covering residential sales and lettings, international, rural and commercial with 70 offices in the UK and international offices in Europe, Asia, Australasia, Africa and the Middle East.
long and proven track record of strong growth performance and market transparency. Te legal system as it relates to property is straightforward with clear title assured while transaction costs are relatively low by international comparison. Moreover, with careful planning, it is possible to reduce the tax burden both on acquisition and disposal of property. Te ongoing turbulent international economic and geo-political
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environment has enhanced London’s reputation as a safe haven for investors. Consequently, overseas buyers dominate in the prime central areas, many of them benefitting from favourable exchange rates against the Pound. Indeed, the majority of mid-high end developments have recently been sold via overseas exhibitions either directly or through follow-up activity. In spite of the uncertain economic outlook, buyer demand remains
robust in the prime locations, which has helped push prices above their pre-recession peak levels. For example, average prices in Kensington & Chelsea and Westminster are now, respectively, some 17% and 15% above their previous peak. Tis compares to average London values which remain a little over 1% below peak.
Figure 1: Prime London prices as at December 2011 versus pre-recession market peak
ondon is an attractive proposition from a residential real estate perspective, offering a large stock of high quality properties and a
periods and displaying lower volatility. Te lettings market is expecting a short term boost this year as a result of the large visitor numbers expected for the Queen’s Diamond Jubilee and the Olympic Games.
Figure 2: Nominal total returns, ungeared, as at December 2011
Source: Investment Property Databank
Interestingly, we have noticed that Middle Eastern buyers have extended their traditional focus on prime centrally located, high-end lifestyle properties to include mid-market units in secondary locations acquired purely for investment. Tere is also increasing corporate interest in the sector, mainly from international groups. Te outlook for the prime London property market remains healthy. Although the UK’s economic prospects are still uncertain, the prime residential segment has become more of an international than a domestic market and will be increasingly influenced by the behaviour of internationally mobile HNWIs rather than by domestic events l
Source: Land Registry Supply continues to lag behind demand, which is helping to sustain prices.
Average annual completions in London since the recession have been running at around 76% of their long term trend. Tis is particularly apparent in the prime segment which has triggered a number of speculative schemes that have generally attracted strong buyer interest. Te continuing expansion of the private rented sector is encouraging
investors, including a growing number of corporate players, to enter the market. Recent data from IPD (Investment Property Databank) reveals that residential compares favourably with other mainstream assets over the longer term – for example, outperforming equities over 5 and 10 year
18 I CITYSCAPE I APRIL 2012
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