The London prime property market is starting to show hints of a more proactive nature. Throughout August and indeed for the majority of 2015, the prime market has been soft, with limited growth in property prices above £2million. Higher stamp duty may have contributed to the reluctance of investors to make decisions on more expensive properties, and a ‘wait and see’ approach by many investors with regard to the current global financial climate has also had an impact.
But despite a relatively quiet period, London prime property continues to show positive growth. So much so that a number of developers are now going ahead with new schemes that could bring a considerable amount of new property onto the market – just in time to meet a growing demand.
‘Safe Haven’ markets
There is also evidence that buyers and investors from the Far East have increased their interest in what they term ‘safe haven’ global property markets such as London. They are currently looking for property in ‘golden postcode’ neighbourhoods like Mayfair, Belgravia, and the ever-popular E14 and Canary Wharf areas.
Annual growth figures in the London Prime property market to August were still soft, however, at around 1.7%, with no monthly increase and a quarterly increase of around 0.8%. This actually falls in the favour of investors, who are entering a soft market that looks set to rise over the coming months, and recover some of that lost growth momentum. A sense of normalcy is returning to the market, and vendors are trickling a number of new properties onto the market. So while there isn’t a glut of properties about to come on to the books, there are plenty of prime property opportunities that will encourage more investors to expand their portfolios in both established and up-and-coming prime areas.
Buy to let
One of the biggest growth areas in the prime market is the buy-to-let market, which is showing strong performance and good returns for investors. The autumn is traditionally a time when overseas workers change jobs, and with an influx of high-income professionals now looking to settle in the capital, those investors with short and medium-term lets available will have the pick of tenants eager for prestige property in central locations. And it is the location that will swing things, as tenants look for convenient properties close to the financial centre of the city, the West End and the newly emerging area of Greenwich.
Employment relocation a driving factor
Recent surveys suggest that over the first half of 2015 around 67% of tenants were renting due to employment relocation, compared to 55% in 2014. This mobile workforce is driving the buy-to-let market and multiple occupancy developments, and the forecast is that this is set to continue as the economy strengthens in high-pay sectors such as finance, advertising and marketing, IT and telecommunications. Over the next five years it is expected that prime London rent will rise by around 17%, representing an average 3.4% increase in returns for landlords, making rental properties attractive for long-term investment plans.
In the popular E14 and east of the City area that includes Canary Wharf, 31% of buyers over the past 18 months were investors, a significantly higher number than across prime London as a whole. This indicates that much of the property purchased has been for buy-to-let purposes, providing a greater choice for tenants moving to the area.
In prime areas east of the city and particularly in Canary Wharf, there are numerous new build developments, meaning a rash or properties due to come to the market over the next five years. However, despite a rise in supply, demand is still very strong for this part of the capital, and key developments are seeing strong off-plan sales as well.
The next quarter
The autumn is always a busy period for the London Prime property market, and industry experts are expecting this next quarter to be no different. “We always see an increase in movement across the Prime market once we go into September, and this year is showing signs that a more pro-active and positive approach is being taken by vendors, buyers and tenants,” comments Joel Brookes from Prime property experts Vanet.
“We also recognise that landlords in particular want a more cohesive service from their management agencies, and are expecting not just a finder’s service for tenants, but a full property management service too. This means that agencies are going to have to adapt to meet the demands of the Prime rental market, as well as working hard to encourage positive growth in sales. It’s going to be a challenging and very busy quarter, but one that should see the Prime London property market really start to wake up from its slumber, and show some real forward momentum,” he concludes.
|*All figures and quotes are accurate at the time of publishing|