Why Super-Prime Needs a New Definition

By Oliver Burns

< Back to ob world

November 22, 2013|

  • Super-prime’ is a term used abundantly these days to describe any property valued at the top end of the luxury property market, but I think the traditional definition of super-prime is quickly becoming out of date. Currently defined as £10m+, super-prime property usually comes with high-end features and a golden postcode. However, when you look at what’s on the market, you realise that £10m doesn’t buy you a mansion these days, but more likely a 3-4 bed apartment or period townhouse of modest proportions, albeit in one of the most desirable locations in the world. Although growth has been slowing in recent months, the price of homes in the £10m+ bracket has gone up exponentially since the beginning of 2011* and what was once considered ‘prime’ property has moved into the super-prime price range. With this in mind, I think it’s time to establish a new definition of ‘super-prime’ to help keep it exclusive.
Image sourced via Luxury Launches

GROWING WEALTH

Super-prime property has traditionally been the preserve of the very wealthy, and for obvious reasons; there is a very small niche of the population who can afford to buy in this sector of the market. It’s an exclusive club that only a few are able to join, and what makes it even more desirable is that residential property at the top-end of the market is increasingly hard to get hold of. We can learn a lot from brands like Hermès and Aston Martin, whose formula of limiting supply to keep the desire strong not only fuels demand, but makes those who have been fortunate enough to buy, feel like they have something truly special.

With the growth of ultra high net worth individuals, this position comes under threat as this elite club starts to expand and as a result becomes somewhat less exclusive. As the wealthy grow in numbers, the only factors keeping this demand at bay are price and availability. With current demand fairly warm and prices comparatively high, we are going to need to maintain this position for London to hold onto its newly acclaimed status as the global capital for super-prime property.

The European Council of Foreign Relations building now sold: Image sourced via The Evening Standard

INCREASING SUPPLY

The huge sell off of London’s embassies is believed to create £3bn of prime and super-prime homes in some of the best addresses in the capital*. With rich architectural heritage and generous proportions, many of these buildings present exciting prime residential opportunities if done to exacting standards. Although the embassies are not inexpensive, they are still getting snapped up as a raft of investors grapple to secure what is seen to be some of the best prime residential space on the market.

However, the increase in luxury residential property this creates will potentially have large implications for the market, flooding it with high-end prime residential units as developers look to the secure best returns for their significant investments. In my mind, such a vast sell-off comes with a risk, and this is that the market is going to be saturated with super-prime property, making what was once an exclusive sector and hard to get hold of, much more attainable. Although growth is strong, it’s worth keeping in mind that there are only around 2,200 billionaires and 190,000 HNWIs in the world*, so whilst growing, the numbers are still very small. Demand is not inexhaustible and if we are not careful and this happens, it will take some time for the market to recover.

Image via Oliver Burns

DEVELOPING FOR THE SUPER-PRIME BUYER

Keeping property attractive to potential investors and buyers is also fundamental to maintaining exclusivity in the super-prime sector. At Oliver Burns, we believe that creating unique properties in the right locations with best-in-class finishes, bespoke furniture and detailing, timeless interiors and an opulent quality that luxuriates throughout should sit at the core of any top end development. Developments of more than ten units in the super-prime market have proved a difficult sell within a reasonable timeframe, meaning developers are holding stock for longer. Not only does this reduce desirability and leave unwanted property on the market, we are not playing to what clients want when they look to buy super-prime property in London. Wealthy buyers are shrewd and will go for unique and exceptional properties that give them beautiful homes and deliver the best returns on investment.

By creating a new definition for super-prime, maintaining a careful balance between supply and demand, and developing property to the standard expected by the ultra high net worth buyer, we will be able to keep super-prime exclusive. If we achieve this, then London will continue to have something very desirable the rest of the world want, and surely that’s got to be better for everyone.

*Source 1: Knight Frank’s Super-prime London Report 2012

*Source 2: The Evening Standard 21st August

*Source 3: Knight Frank’s The Wealth Report 2013

OB NEWSLETTER

Be the first to hear about our super-prime projects.