Market
Insight
24 Curzon Street, London, W1J 7TF 020 7499 7722 www.beauchamp.co.uk
Market update
As predicted by Beauchamp Estates, 2013 began with something of a frenzy of activity in prime central London. Given the outperformance of the prime London market in 2012 (13.4% growth in Kensington and Chelsea values compared with 1.7% growth nationally), we feel confident that 2013 will continue to be even more dynamic. Global uncertainties remain, but in terms of prime central London the market remains strong and buoyant. Measures announced in the Finance Bill in December 2012 clarified the position for non-natural persons (i.e. a company purchase). The increase in stamp duty from 5% to 7% for individuals purchasing properties in excess of two million pounds has been absorbed into the financial landscape. We are continuing to see a confident market place, demonstrated by a substantial rise across our markets, with Belgravia and Knightsbridge, despite heavy competition from other prime central London locations,
remaining the hot spots.
Testament to the unashamed appeal of London, overseas purchasers continue to flock to secure a holding in one of the world’s safest investments and remain the driving force behind the market, particularly at the upper
end. Property owners in the prime central London market come from across the world, attracted to London for its cultural diversity, economic and political stability and renowned financial institutions. Continued weakness in the pound has further boosted the
attractiveness of investing in central London. Those benefitting from the exchange rate include Singaporean buyers purchasing a property in central London who today will find it 10% cheaper than five years ago. The strengthening of the Euro against Sterling, has added to the appeal of central London property which remains at an all-time high to the European buyer. In particular the French and Italians dominate the market, not only relocating here but buying substantially for investment purposes.
The domestic market has also been buoyed up by relaxed lending boosted by the launch of the Funding for Lending Scheme in August which has reduced the lending costs of financial institutions. Mortgage approvals are rising and the Council of Mortgage Lenders forecast a further 10% rise in lending in 2013. Although many buyers in prime central London are cash purchasers, recently released Census data shows that around 38% of owner occupiers here are using mortgage finance to buy their properties. The figures range from
around 30% in Kensington and Chelsea to 46% in Notting Hill and Holland Park.
The super-prime market of central London was the star performer of 2012. We saw some exceptional property sales in 2012 across the prime central London area. In the market over £10 million the average price paid per square foot rose by 16.8%. Buyers at the very top echelon of the market would now need to pay an average of about £3,000 per square foot to obtain the finest properties.
Encouragingly, the number of sales in this price bracket rose by 13% compared to 2011 levels. Looking ahead, demand for the most
prestigious addresses - and in particular trophy houses – seems unstoppable. It is likely that this end of the market will continue to outperform over the course of 2013.
International
London
An analysis of the recently produced Census data shows the international influence of the residents of prime central London. Just under a fifth of residents in South Kensington, 18% of those in Knightsbridge and 16% of those in Mayfair have a second address outside the UK. This compares with an average of just 2.7% of
‘‘Demand for London’s most prestigious
properties remains as strong as ever,
operating in a market all of its own.’’
GARY HERSHAM, DIRECTOR
Residents with second address outside the UK
The chart shows the percentage difference in transactions and average price paid per square foot for properties sold in prime London in 2012 compared to 2011 by price band. -20% -10% 0 10% 20% 0% 5% 15% 10% 20% May fair St Joh n’s W ood Knigh tsbrid ge Belgr avia Sout h Ken Hamps tead Kens ingto n Chels ea Wes t Brom pton LON DON Nottin g Hill / Hollan d Park
Prime central London market in 2012 compared to 2011
The chart shows the proportion of residents for each local area who have a second address outside of the UK according to the 2011 Census.
Source: Lonres Source: Lonres
Under £2m £2m–£5m £5m–£10m Over £10m TRANSACTIONS AVERAGE £PSF ACHIEVED
residents across London as a whole. This reflects the truly cosmopolitan nature of the Capital. Families here speak a rich variety of languages. After English, Arabic is the mostly widely spoken language amongst families living in Westminster, according to a recent survey and in Belgravia, Russian is the second most spoken language. French and Italian dominate in South Kensington. The attraction of both its garden squares and the proximity of The Lycee draw French purchasers to the area. The area proliferates in French, Italian and Spanish restaurants and cafés, lending the area a continental air – especially on a sunny day. Indeed London is seen as the sixth largest French city.
The number of French nationals resident here is only expected to expand as President Hollande presses ahead with recently contested plans to introduce a 75% upper income tax rate. Since the introduction of the government’s flagship
campaign, a number of France’s wealthy individuals have already moved overseas to more efficient fiscal regimes with London proving a popular choice, where they can feel truly at home. Indeed, an analysis of all overseas residents moving to central London in 2011-12 shows that 12% moved from France alone.
New
development
The influx of wealthy overseas buyers to central London and increased demand for high-end luxury new developments has spurred developers to build in this lucrative market. As a result there is a new wave of luxurious developments at various stages of the
construction process. These include a number of small developments – for example in the West End we have successfully been marketing three
stunning contemporary new-build penthouses, constructed by a small private company. In Chelsea we have also been marketing three new build spectacular freehold houses in Pond Place, (asking prices in the region of £10,250,000) and constructed by our clients Morpheus - a young dynamic duo who truly understand the contemporary mindset.
We recently tested the far eastern markets of Singapore, Hong Kong and Malaysia with an initial release of a small number of units being constructed on one of the primest and largest sites in Islington and immediately concluded more than forty sales. We have since agreed the sale of all the penthouses in the development and will revisit the Far East in the autumn with Stage Two of the project.
The most spectacular of developments is the restoration of eight grade I listed houses in Cornwall Terrace, Regents Park.
• On 24th January, the government announced new planning measures to come into force in Spring 2013, enabling office space (B1(a)) to be converted into residential (C3) without the need for planning permission. The new permitted development rights legislation is currently time-limited for a period of three years and local authorities will be given an opportunity to seek an exemption should they feel that the changes would have an adverse effect on the local
economy. Both the City of London and Kensington & Chelsea are reportedly among those seeking to opt out of this legislation although exemptions will only apply in ‘exceptional circumstances’.
• New rules on EPC’s – as of January 2013 any
Grade I or II listed property is exempt from requiring an EPC, theoretically because too many of the energy efficiency improvements likely to be recommended will not be permitted under the restrictions that arise from its listed status. This rule does not apply simply if the property is in a conservation area.
Recent Government
announcements
London’s appeal as an international investment
FRANCE ITALY SWEDEN SPAIN GERMANY GREECE REST OF EUROPE USA AUSTRALIA ASIA ASIA NEWLY INDUSTRIALISED DEVELOPING REST OF WORLD
MIDDLE EAST & NORTH AFRICA
% OF OVERSEAS RESIDENTS MOVING TO CENTRAL LONDON 2011-12 12.3% 10.4% 8% 5.4% 3.4% 3.0% 19.6% 7.7% 5.9% 0.9% 8.3% 4.4% 10.8% 0.2% -2.1% 1.2% -1.4% 0.9% -6.0% -0.4% 2.3% 3.3% 1.8% 6.6% 5.2% 3.2% 33.1% UK £ -11.3% AUS $ 18.2% EURO 6.5% US $ 5.8% HK $ 33.1% RUB -10.3% SING $ % CHANGE IN GDP, 2012 CHANGE IN THE VALUE OF CENTRAL LONDON PROPERTY IN THE LAST 5 YEARS IN LOCAL CURRENCY
To many, Belgravia is still perceived as the number one spot in the number one capital of the world. The brainchild of the Grosvenor family, the area was developed in the 19th Century to provide the highest quality homes for the wealthy. Today, the grand squares and terraces of stucco houses remain some of the most sought after and expensive real estate in the world. Sales prices within SW1X (Belgravia) averaged £2,095 per square foot in 2012 (despite a number of these being short-leaseholds), the highest of any postcode district in the country. Strong demand for homes in Belgravia, both from within the UK and abroad, has seen prices increase by 55% over the last five years. As such, Belgravia is the focus of a significant proportion of Beauchamp Estates’ business and, of course, the Eatons are perennial favourites. Eaton Place, located in the heart of Belgravia to the north of Eaton Square, is lined with grand stucco terraces. Whilst initially built as impressive family homes, today homes in Eaton Place have largely been converted into flats, although the desire to return to a single family house remains strong. Prices on Eaton Place reflect the desirability of the street, with flats sold in 2012
achieving an average sales price of £1,973 per square foot.
Deals done by Beauchamp Estates in Eaton Place over the last few months, include a large unmodernised house and the best part of another unmodernised freehold. We recently sold a huge penthouse to a French buyer, in neighbouring Eaton Square. Interestingly we first showed him the flat two and a half years ago, and after investigating the market, realised that this was the only address for him. On the other hand, a first floor flat in Chesham Place also sold to a French buyer who exchanged and completed in a mere eight days!
There were 21 flat sales in 2012 with prices ranging from £1.3 million (for a 1 bedroom flat with a relatively short lease remaining) to £6.15 million (for a long leasehold four bedroom flat). The highest price per square foot paid was over £3,200.
A three bedroom flat has already sold in 2013 achieving over £2,600 per square foot. With 10 properties currently available for purchase on the street, we can expect an influx of new residents into Eaton Place in 2013.
Belgravia SW1
£6.595m
3422 sq ft 205 years remaining on lease
An unusual and spacious 4 bedroom upper triplex apartment with vast atrium allowing sunlight to flood throughout the flat.
Belgravia SW1
£1.45m
1763 sq ft 7 years remaining on lease
Beautifully appointed raised ground floor lateral apartment in what is widely regarded as London’s premier address.
Belgravia SW1
ASKING PRICE
£15.95m
3651 sq ft Freehold
A stunning contemporary penthouse, overlooking the gardens of Chesham Place.
Belgravia SW1
£POA
9135 sq ft Freehold
An opportunity to purchase this magnificent property. One of the few newly built houses in Belgravia since the Second World War.
Eaton Place - significant property sales
“‘Belgravia is our home –
Knightsbridge, our shop’
as one of our favourite clients frequently tell us.
”
PENELOPE COURTSOLD SOLD
RECENT BEAUCHAMP ESTATES
INSTRUCTIONS AND SALES
Source: Lonres £12m £10m £8m £6m £4m £2m £0
FOCUS ON
BELGRAVIA AND EATON PLACE
1991 OCT
FLAT HOUSE 4 BEDROOMS no 16 PROPERTY NUMBER
no 67 no 61-63 no 13 no61 no 81 no 49 no 59 no53 no 96 no91 no 97-99 no 103 no59 no 71-73 no 40-42 103no 8 3 2 5 15 3 3 3 3 3 3 3 3 4 4 4 1994
Chart shows the number of properties made available to let for more than £3,000 per week along with the annual change in the average weekly rent achieved for properties let over £3,000 per week in prime London.
Rental market over £3,000 in prime London
Size of private rented sector by area, 2011
Prime Rents
The size of the private rental market in London has grown significantly over the last decade alone. In 2011, a quarter of London households rented privately, up from 15% in 2001, boosted no doubt by the increased constraints to homeownership. However, it is in the core, most central areas where the importance of the private rental market is most pronounced. According to recently released Census data, over half of households in Mayfair now live in the private rented sector with Knightsbridge and South Kensington following close behind. In a similar vein to the sales market, the rental market of central London continues to attract wealthy tenants from all over the world and primarily from the Middle East, Russia and other CIS countries, for both business and leisure. Highly accessible London often acts as a base for US executives conducting business across Europe, and with its substantial expatriate communities, London is seen as a welcoming, cosmopolitan destination to live and work in.
Wealthy families originating from countries such as Saudi Arabia or Qatar, appreciate the London weather in the summer time! Also, the plethora of highly-desirable pied-à-terres, with roof terraces available to rent and with parking and luxury services, in the heart of prime Mayfair and Knightsbridge, appeal to this well-heeled market.
South Kensington and Chelsea enjoyed a particularly strong year in 2012 with average rents achieved rising by 6.3%. This rise in rents came despite a 14% increase in the number of properties made available to let over the course of the year compared to 2011. High net worth international tenants remain the key driver of demand. South Kensington, a
popular choice for French nationals, has in particular benefited from France’s proposals for a tough new tax regime for the most wealthy. At present, demand is focussed on the £5,000–£10,000 per week market segment and we expect that as we move into spring and summer, super-prime properties for between £12,000 and £20,000 per week will become increasingly sought-after. Indeed, the super-prime sales market enjoyed a strong year in 2012 with an increase in transactions as overseas investors and occupiers sought to pour their wealth into the Capital’s real estate. It is perhaps of little surprise therefore that a number of these properties have found their way into the lettings sector.
In 2012, central London saw a 70% increase in the number of rental properties made available for over £3,000 per week over 2011 levels. As an indicator of the strength of demand at this end of the market, despite this increase in supply, rents continued to rise. Properties let over £3,000 per week achieved rents on average 5.1% higher in 2012 than those achieved in 2011.
We fully expect rental values in prime central London in 2013 to maintain and possibly even exceed their 2012 high, with further
growth in 2014.
We would also expect outperformance in the sales market once again in 2013 as demand for the most prestigious London addresses continues unabated.
SOME OF OUR
PRIME RENTAL PROPERTIES
Knightsbridge, SW7
£3,900/week
Available to let through Beauchamp Estates
Chelsea, SW1
£4,500/week
Available to let through Beauchamp Estates
Mayfair, W1
£3,250/week
Available to let through Beauchamp Estates
0% 0 -20% 10% 200 -10% 20% 400 0% 30% 600 10% 50% 40% 800 20% 60% May fair St Joh n’s W ood Knigh tsbrid ge Belgr avia Sout h Ken singt on Hamps tead Kens ingto n Chels ea Wes t Brom pton LON DON Nottin g Hill / Hollan d Park
Source: 2011 Census Source: Lonres
2007 2008 2009 2010 2011 2012 SUPPLY OF PROPERTIES TO LET
Beauchamp Estates is a firm privately owned
by Gary Hersham and Penelope Court with
more than thirty years of experience
in both the residential and commercial
markets. We have specialist skills in acquiring
and selling prime central developments and
super-prime houses and flats.
The dynamic market which London has
enjoyed over the last three decades has
enabled the firm to create a successful and
enterprising company. The two partners have
worked together since the late 1970’s, giving
them a sense of continuity rarely experienced
by their competitors. Their enthusiasm and
dedication has resulted in a client list that
reads like a global who’s who of buyers and
developers alike. The firm is instrumental in
achieving sales in the order of one billion
pounds per annum.
Beauchamp Estates operates in Mayfair and
St John’s Wood in London, Cannes in the
South of France, the Island of Mykonos
in Greece and its new office in Florence in
Tuscany, Italy.
ABOUT
BEAUCHAMP
ESTATES
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SPRING 2013
LONDON 24 Curzon Street London W1J 7TF 020 7499 7722 www.beauchamp.co.uk FRANCE19 rue des Etats-Unis 06400 Cannes France www.beauchamp.com GREECE Rohari Mykonos Greece 84600 www.beauchamp.gr ITALY
Lungarno Benvenuto Cellini 25/C - Firenze
50125 Italy
