Luxury Property Market Update – London
Pandora Mather-Lees
Director
IORMA Luxury and Creative Centre
March 2024
Introduction
Pandora Mather-Lees, Luxury and Creative Centre Director at IORMA, shares insights into the luxury sector’s future. This division of IORMA, focused on global luxury consumers, aims to integrate knowledge about trends and new technologies as they affect future commerce.
The luxury property market in the United Kingdom is a dynamic sector that reflects the economic landscape, global trends, and the evolving preferences of high-net-worth individuals. In this article, we will explore key statistics and insights from various sources to provide a comprehensive overview of the luxury property industry in the UK, with a particular focus on London.
Overview of 2023 Luxury Property Sales in London
Property agents have reported mixed results for sales over 2023 yet they have demonstrated resilience in an environment which has proved to be somewhat volatile.
Barnes which has 130 offices worldwide conducts surveys with a significant research sample. Moreover, it builds upon that research year on year. The survey includes staff, experts, published sources and clients worldwide to produce a solid overview of the luxury sector concerning all things related to real estate.
Barnes International City Index 2024 suggests there is an explosion of digital nomads. London, along with Paris and New York hold it’s own,in 6th place world wide in the city rankings and was at 3rd place in the 2023 rankings of the Global Property Handbook despite a slowdown. No regional British cities featured unlike say the US. London will, however, have to compete with ‘cities of the future’ namely Dubai, Miami and Austin, Texas which are performing well on its City Index. The growing digital nomad and uber rich sectors seeking stability, quality and optimum location are contributing to the stability and future growth of the luxury property sector.
£7m will afford a house in Belgravia, Wimbledon or Kensington. £1m will buy a 950sq ft apartment with 2 beds in Westminster or a one bed 656 sq ft in South Kensington, the latter being one of the few premium locations in London to show an upward trend in prices.
According to a Savills review of 2023, the luxury property market saw substantial activity. A total of 390 properties valued at over £5 million were sold, with 45% of these transactions involving apartments. In the £10 million plus market segment, sales experienced a notable uptick. Specifically, Q3 of 2023 witnessed the sale of 120 luxury properties, highlighting a robust performance in this segment.
The driving force behind these sales appears to be a demand for world-class apartments, particularly in prestigious London postcodes.
LonRes Monthly Prime Property Briefing
LonRes produces a month by month property briefing. Towards the end of 2023 in November, Lonres painted a positive outlook for the luxury property market. Despite uncertainties, the prime central and outer London markets showed resilience, with increased numbers of prospective buyers registered and there were higher exchange figures. However, figures were somewhat more modest with average prices in prime central London experiencing a 1.6% decline year-to-date. On the rental front, the prime London market exhibited signs of normalization, with rental values growing (albeit by less than 10%) in the year to October.
High end property agent Knight Frank is known for its keen analysis of the property sector. Knight Frank’s Intelligence Lab presents an online podcast with an analysis of predictions for 2024. Following a lot of volatility Tom Bill Head of UK Residential Research predicts a stable and modest trajectory for London residential sales citing a settled economic outlook. Flora Harley Head of ESG research at Knight Frank mentions 58% of investors are seeking bad EPC performing properties which will create an opportunity for investment and refurbishment. More regulation around ESG factors is on the cards. However, these may be sidelined in the short term by government in view of political sentiment surrounding the upcoming lead up to the election.
By comparison, the lower end of the market the industry has not fared so well proving that the luxury sector is more resilient as it always has been. While the decline in UK house prices reversed in October, mortgage approvals increased. Despite this, signs of strain are visible as homeowners shift from fixed-rate mortgages to more expensive deals.
Transaction Trends in Prime Central London
Justin Mason’s Prime Central London Update highlighted a decrease in prime central London sales activity in Q3 2023, with a 24% decline in transactions compared to Q2 2023. However, the 12-month data until September 2023 indicated a 6% decrease in sales volume, but a significant 36% increase compared to the Q3 2016 to Q1 2020 average.
Market Predictions and outlook for the coming year
Market predictions for 2024 indicate a positive turn, with viewing numbers on the rise. Knight Frank forecasts a 3% rise in mainstream UK property values in 2024, a significant shift from the 4% decline predicted in October. The Bank of England’s decision to pause interest rate rises and subsequent mortgage rate reductions contribute to this optimistic outlook.
Savills predictions for 2024 include a positive outlook for rentals set to grow by 18% by 2028, with institutional rental investors being the catalyst looking for returns rather than capital growth. This is despite the assumption that interest rates will remain steady if not lowered. Outside of this, they rather see growth coming from other areas such as arable land and the North West of England.
We spoke to Alan Waxman, Founder and CEO of Landmass. Landmass is a property development, design and architecture consultancy with success in the luxury UK residential sector. Waxman comments as follows:
“The world continues to become a more dangerous place and a wealthier environment, continuing to drive demand for London property as its position as the international city of the world continues to strive.
Usually, the market would view a General Election as a big point of uncertainty, preceded by a pause in home-buying activity and much handwringing at the prospect of e.g. a mansion tax. This time, however, luxury property professionals appear quite sanguine about the prospect of a Labour government (which polls suggest is the likely outcome), so long as it’s led by Keir Starmer. “The likelihood of an incoming Labour government no longer feels like a massive threat to prime property markets in London and the country.”
There will always be demand for best in breed and more and more international buyers are looking for “turnkey” luxury properties, where they are happy to pay a premium to avoid the hassle of dealing with builders.”
Conclusion
In conclusion, the luxury property industry in the UK, particularly in London, has experienced a mix of challenges and opportunities. While some segments face pricing pressures and fluctuating demand, others, like the luxury apartment market in London, have seen robust sales. The overarching theme is one of resilience, with market participants adapting to changing economic conditions and consumer preferences.
The outlook for 2024 is positive, driven by factors such as paused interest rate rises and reduced mortgage rates. At the very top of the market, buyers will be less affected by financial constraints, nevertheless, general uncertainty may delay decision making. Against this, the relatively safe and strong political and socio-economic environment in the UK compared to other investment options is a factor that will contribute to inward investment from the UHNW sector. Finally, it suggests a potentially vibrant future for the luxury property market in the UK where properties featured by the companies mentioned here compete on an international scale for unparalleled quality, sophistication, splendour and tech-forward residential design.