The prime residential property market is unlike any other property market, and the past 12 months have underlined this fact.
This unique asset class is renowned for its demand, value and resilience but, of course, no sector is immune from unpredictable circumstances and an ever-changing economy.
Last year’s Brexit negotiations caused uncertainty, ultimately slowing the property market. This was later exacerbated by the general election at the end of 2019.
However, with a majority Conservative government elected, all the signs of a ‘Boris Bounce’ were in place and the prime residential London market performed strongly in early 2020; then Covid-19 blindsided us. With the first lockdown in March, and now a second lockdown, the market has been and continues to be truly tested.
In September 2020, Bloomberg reported that the UK’s residential property market had ‘defied the economic fallout from Covid-19’, following a freeze in property transactions throughout lockdown.
Nationwide Building Society supports this, reporting that annual house price growth has accelerated by 5.8%, climbing 0.8% month on month.
The prime London market bounced back with haste, kicked off by the quick sale of a £2.5m St James’s Park penthouse on the first day lockdown eased.
Recent forecasts from Knight Frank paint a positive picture for the near future by estimating above 5% growth in London prime markets in 2021. The firm also expects prime London markets to outperform prime regional and mainstream UK markets over the course of the next five years. So prime London property remains attractive.
While prime areas in major cities such as Paris, Dubai and Hong Kong continue to develop, there are many reasons why London holds some of the strongest international appeal, including the English language, time zone and world-class educational system.
Areas of Mayfair and Belgravia in prime central London are impossible to replicate elsewhere; their 300-year history and classic characteristics are iconic. Say ‘Eaton Square’ and across the world those with a global outlook are likely to picture where you live, while ‘48th and Park’ does not have quite the same resonance.
Travel restrictions may temporarily slow purchases by international buyers, but when measures were eased in May, buyers from across the world returned to the prime London market, with a significant volume of sales being transacted at strong values from both domestic and international buyers.
As a result of lockdown, many buyers’ priorities have changed. These trends are mirrored in the prime property market. According to Savills, there was a 97% increase in requests for a property with a garden in prime London over the summer.
Understandably, other data has pointed towards this increased desire for green spaces and home offices. Data from Knight Frank earlier this year showed that greener areas such as Richmond had rebounded quickly, demonstrating the increase in demand.
However, this renewed interest in greener areas is not to the detriment of London. While buyers may wish to have a property in leafy Surrey or Hampshire, Dexters found that sales agreed over £2m in prime central London were up 85% from mid-June to mid-August compared with the same period in 2019. This suggests a home in the capital is still very much desired.
Prime London areas such as Mayfair and Belgravia are impossible to replicate
Many of us have missed the attractions of central London, the restaurants, the buzz and leisure spaces on offer; the ability to walk to the office is now more attractive than ever.
In Q2 of 2020, CapitalRise saw an 80% increase in funding requests from borrowers compared with Q2 of 2019. Traditional lenders may have withdrawn from this market, but alternative lenders are rapidly filling the void. Despite the ongoing pandemic, we see no reason for this trend not to continue in the coming months.
Even with Covid-19, the domestic and international appeal of London has not appeared to waver. Developers are keen to serve this demand; so far in 2020 we have funded assets with almost £100m gross development value in high-demand prime areas.
With funding available to continue with these exceptional projects, the prime residential London market looks set to live up to its reputation.
Uma Rajah is chief executive of CapitalRise