One topic that was likely to have dominated debate among London-focused residential developers and investors along the Croisette at Mipim last week was whether or not the prime central London property market has finally reached its peak.
Of course, the reality is that there is no straightforward answer.
When considering the issue, it is first necessary to consider what really constitutes ‘prime property’. The definition can vary widely - some will see it as properties priced at £1m and above, while others will see it as properties priced at £5m to £10m-plus. Put simply, developments in different segments of the high-end market will perform differently.
True, market data looks softer. Increased supply, weakening emerging markets, stamp duty increases, interest rate risk, a potential Brexit and more stringent mortgage regulations have caused the market to flatten. The across-the-board double-digit growth seen in recent years can no longer be relied upon - according to Savills, prime London house prices grew by a marginal 0.5% in 2015.
Just this month, it was reported that hedge-fund managers are taking short positions, in a bet against London’s luxury housing sector. However, opportunities for strong returns are available for those adopting the right development strategies.
Product quality and differentiation of stock are key to success. Oversupply issues mean delivering luxury property that stands out to buyers is essential. In Westminster, we have seen a dramatic increase in the supply of prime resi property, spurred primarily by the relaxed planning regime for change of use from office to resi.
At our two recently completed luxury schemes - the Pall Mall Collection behind St James’s Park and the Maddox Collection off Regent Street - we continue to receive enquiries for the remaining properties, priced between £3.65m and £9.95m, showing there is still appetite for properties at the higher end of the market.
Our primary focus is to deliver high-quality properties with outstanding product differentiation. This not only means the highest specification, but also additional touches that make each apartment unique. Outside space is another premium, and the penthouse at the Maddox Collection has five private terraces, while the apartments at the Pall Mall Collection have views of St James’s and Buckingham Palace.
Ultimately, for properties to compete, they must stand out from the crowd. Our schemes have been designed for owner-occupiers at the higher end of the market. Buyers want a product finished to the highest standard.
This is particularly true of the domestic market, in which buyers who are looking to upgrade from a furnished rental property to buying a home are unable to do so due to lack of stock that is up to their exacting standards. We are capturing these buyers with properties that offer something unique. As testament to this, our quintessential British scheme Park Crescent has been inundated with demand from domestic buyers.
Whether or not the prime central London market has reached its peak remains to be seen, but we can be certain London will continue to be a leading city that keeps attracting the best international businesses and people, and that these people will be looking for, and prepared to pay for, high-quality property.
Developers who can meet this demand for bespoke, high-end resi property in the right locations can look forward with confidence to a sustainable and buoyant market.
Chris Lanitis is a director at Amazon Property