Super-Prime Property Market View 2016 – Part One

By Oliver Burns

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February 2, 2016|Super Prime Property

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  • ondon is the most desirable global city for the super wealthy. But with property prices reaching record-breaking levels and ongoing tax concerns, what does the future hold for the super-prime sector? This week, in a four part series on the Super-Prime Property Market, Joe Burns discusses his thoughts on how 2016 will play out for super-prime London, and the emerging trends among our ultra high net worth clients that will drive the rest of the market.
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Super-Prime Market Performance

The super-prime property market has cooled down in the last year but overall remains relatively stable. It’s a buyers market at the moment and I anticipate that this will continue throughout 2016. Price growth was behind the prime market in 2015 following some settling out post the election and government tax changes. Yet despite this sober performance, new price records were broken with a penthouse at 77 Mayfair, South Audley Street, being sold off plan for £7,000 per sq. ft. last summer. This signifies that super-prime buyers will still pay for the right quality in the right location. Buyers are, however, increasingly selective and are prepared to wait for the right property. Certain property types such as penthouses will continue to attract buyers due to their rarity. We have already received a lot of interest in the penthouse we are collaborating on with Dukelease, which has an excellent location on Jermyn Street. It is a duplex with an additional roof terrace that gives stunning views over St James’s. It’s not on the market yet, but when it’s complete, it will be completely unique.

Image via PrimeResi

The new record prices achieved last year reinforce London’s status as the super-prime property capital of the world, but at the same time present a challenge for the market. Price inflation is becoming a key concern for the super-prime sector and this will become more evident this year. Market prices are already out of proportion to the rest of the world and this discrepancy is further highlighted by the fact that London homes have now reached almost double the price per square foot of New York homes in certain locations. For example, a house in Knightsbridge costs on average £2,294 price per sq. ft. which is almost twice as expensive as a home on the Upper East Side in Manhattan.* The UK still needs to work hard to attract global investors despite it being a popular destination for safe haven investments. We need to consider that London is competing with other international cities, so developers and sellers need to be careful that property isn’t priced out of the global super-prime market.

Image via Barratt Homes

What will boost the market in the next few years is good stock coming onto the market. Large super-prime schemes such as 20 Grosvenor Square, One Grosvenor Square, Chelsea Barracks and Audley Square will all attract global buyers. However, one of the main constraints to growth is the sign of overcapacity in the prime market, which will have a knock on effect on super-prime, bringing prices down. Nine Elms and Battersea Power Station are two major schemes delivering huge numbers of new homes, but they all need buyers. For regeneration areas, it takes time for them to become places people aspire to live in, it doesn’t happen overnight.

Overall for 2016, we expect price inflation, overcapacity in the prime market and ongoing tax uncertainty to continue to remain a shadow over the super-prime market and stall its growth. As a result, the market is most likely to be relatively flat as prices settle out and buyers exercise caution.

Despite the slowing down in the market, the super-prime map of London is continuing to develop. In part two of our super-prime series, I explore the evolving golden postcodes of super-prime London.

*City AM

Written by JB


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