Who is buying up Central London?

Who is buying up Central London?

According to the latest analysis from London Central Portfolio, homebuyers, increasingly attracted by discounted luxury property now represent 45% of all purchases in prime central London - tripling their share over the preceding year.

This has resulted in swelling numbers of luxury sales with a 23% increase in activity in Q2 in the £5m - £10m bracket. Conversely, the number of buy to let (BTL) investors has seen a significant decrease, falling by 1/3

Typically targeting properties under £1m, the average purchase price for BTL has fallen 27% to £816,429 over the last 12 months. Against this backdrop, houses in trophy addresses have become much more popular, with a 4.1% increase in sales and a 4.9% increase in average prices in Q2.

In contrast, the number of flat sales have fallen 11% and prices have increased by just 2.6%. The desertion of PCL’s new build sector continues, reflected in a 55% decrease in sales in Q2, compared with 9% for the PCL market overall.

In terms of nationality, buyers from Far East Asia represent the biggest purchaser, making up 36% of purchases over the last 12 months, followed by Indian and Middle Eastern buyers at 22% and 21% respectively.

Following two years of subdued price growth as buyers have adjusted to continuous changes in the residential tax regime and political and economic uncertainty due to Brexit and two General Elections, Prime Central London showed an uptick in Q2. According to Land Registry data, average prices reached £1.9m following quarterly growth of 5.8%, boosted by a handful of high value sales. Transactions have remained at very low levels with just 3,750 sales over the last 12 months.

A detailed analysis of the headline figures by London Central Portfolio (LCP) demonstrates a notable change in buying behaviour, contributing to the price rally this year.

Within LCP’s managed client portfolio, the number of buy to let investors has seen a significant decrease over the last 12 months, with their share of purchases falling one third from 85% to 55%. Homebuyers, on the other hand, who have been increasingly attracted by discounts available on luxury properties, continuing low interest rates and exchange rate benefits, now represent 45% of all purchases, triple their share from the previous year.

This influx of opportunistic homebuyers has resulted in a notable increase in high value sales, with transaction data showing the £5m - £10m price bracket was the most active in Q2, demonstrating a 23% increase in sales.

Activity has been much slower in the ‘£1m and under’ sector which is largely dominated by buy to let investors. This sector saw a 9.4% decrease in sales in Q2. With the majority of investment purchases now being marketed by highly motivated sellers, the average purchase price for rental investors has fallen a significant 27% to £816,429 over the last year, according to LCP.

Naomi Heaton, CEO of London Central Portfolio, comments: “As international homebuyers identify attractive discounts on top-end properties, particularly as sterling remains weak, they have actively re-entered the market, snapping up deals in London’s best addresses. This year, LCP has been purchasing properties for clients from Regent’s Park’s Nash terraces to Knightsbridge’s premier postcodes. In stark contrast, buy to let investors have remained on the side-lines trying to call the bottom of the market, resulting in a much-reduced share of purchases”.

The dynamics of increasing appetite from homebuyers and a ‘wait and see’ attitude from investors has also contributed to the growing popularity of Central London houses compared with flats. In Q2, the volume of house sales saw a quarterly increase of 4.1% with a 4.9% increase in average prices. This compares with the flats sector where transactions fell a significant 11% and prices increased just 2.6%.

As buyers increasingly opt for trophy heritage property, previously priced beyond their grasp, there has been a notable desertion of PCL’s new build market in Q2, reflected in a 55% decrease in sales.

Heaton explains: “Savvy buyers are recognising the attractions of unique older properties and the added value potential of refurbishment in the current unsettled economic climate. Against this backdrop, new build speculators have pulled back in the face of uncertain or negative returns and the disadvantages of over supplied and commoditised stock. A favourite of Chinese investors, capital controls may also be contributing to falling transactions in this sector. LCP have undertaken no purchases for Chinese buyers this year, whilst Knight Frank reported an 80% withdrawal at IFN’s Real Estate Roundtable this month”.

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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