London is a blossoming place for family offices and high-net-worth individuals (HNWI) that want to invest in luxury property. Due to an increase in the number of new housing developments, the range of choices on offer is becoming vast.
Roughly 1,300 luxury homes were completed in London last year, according to built asset consultancy EC Harris. More impressive is the fact that the number of new luxury homes —on sale for at least £1,350 a square foot — being planned or built over the next decade has climbed 25% to 25,000 units compared to a year earlier. EC Harris puts the total combined sales value of these properties at a whopping £60 billion.
Hot property
There is an astounding array of luxury city-wide projects to entice wealthy buyers, ranging from skyline-changing landmark developments to more discreet innovative boutique builds. New developments include Park Crescent, the iconic John Nash-designed crescent opposite Regent’s Park, which will include contemporary apartments and three mews houses with access to the park via private tunnel.
The Glebe, a new block of apartments and villas in Chelsea, is bidding to become the most exclusive address in London. Prices of apartments in the Norman Foster-designed gated development are likely in the £25 million range, with villas going for around £35 million each.
Also in competition for dearest address is a refurbishment of a 4,000 square foot (sq ft) Davies Street apartment in Mayfair, which Rescorp Residential estimates will be worth£25million when complete. This equates to £6,100 per sq ft compared to the Candy Brothers’ One Hyde Park, which sold for £6,000 per sq ft in 2010.
Design gurus
Two other Norman Foster-designed developments include Upper House in the City of London and the Battersea Power Station project (see main photo). Upper House occupies the top 30 floors of Principal Tower and will be the first luxury apartments in the world to have both interior and exterior designed by Foster + Partners. The renowned architects are also designing Battersea Roof Gardens, while Prospect Place by US architects Gehry Partners will also feature as part of the Battersea project.
Close by, a range of new towers are being developed at Nine Elms in Wandsworth, where the cost of a penthouse is in the £9 million range and apartments from around £650,000.The redevelopment of 1-5 Grosvenor Place, which is located above a new Peninsula Hotel on the site opposite Hyde Park Corner, will create a landmark building for Belgravia and the wider area with splendid views over Buckingham Palace’s gardens. NEO Bankside has apartments on offer for around £5 million, as well as penthouses, providing spectacular views across the river to St Paul’s Cathedral.
For those looking at specific areas, popular destinations for luxury home-seekers remain Bayswater, Notting Hill and west London, while areas undergoing regeneration are a vibrant environment to target opportunities. For example, further supply is expected from the planned redevelopment of Denmark Street and the improvements at Tottenham Court Road, with the iconic Centre Point tower being transformed into luxury homes with impressive views across London’s skyline. The W2 postcode, just north of Hyde Park, is also a hotbed of activity, with a five-year £1 billion plan to turn the Hyde Park end of Queensway into the Covent Garden of the West.
Buyers
London’s real estate market has been a safe haven for HNW Middle East investors, who remain one of the keenest purchasers of London property. According to CBRE, Gulf nations directly invested $3 billion in UK property in 2014, accounting for 10% of the total $26 billion of direct capital flows into the UK real estate market, which was predominantly in London.
One new trend is increasing demand from Middle East family offices and HNWs outside the traditional golden postcodes of Belgravia, Knightsbridge and Chelsea. Many are targeting areas of upcoming London such as The City and Shoreditch, which Jones Lang LaSalle says is driven by a desire to spot new growth areas and achieve higher returns.
The Russian bid is slowly returning after the rouble crisis, while the Chinese are also upping the ante, with many preferring landmark developments for investment. While, Rescorp Residential notes that interest in Mayfair from Indian buyers grew by 50% in the fourth quarter of 2014 and demand could help drive up real estate prices to record highs.
Cooling market
Despite the high number of luxury housing being constructed in the capital, the upper end of London’s housing market is witnessing short-term headwinds. Values in prime central London fell 1.1% during the first quarter of this year, after a 4.2% decline in the last quarter of 2014, according to Savills.
However, the current downturn could be short lived, as prices in the top end of the London market are forecast to rise by 23% over the next five years if there is no further taxation of high value property, argues Savills.
To that end, the luxury property market is destined to be an important investment for any family office or HNWI either as holiday pad, permanent residence or second home in a vibrant, modern city.
