Spotlight on Prime Central London Residential Oct 2011

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<ul><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 1/15</p><p>Savills Research | Residential Autumn 2011</p><p>SavillsResearch</p><p>savills.co.uk/research</p><p>PrimeCentral LondonResidentialSpotlight</p><p>Six years of volatilityA performance review2005 to 2011</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 2/15</p><p>Ths pblcto</p><p>This document was published in October 2011. It contains a review o all the key housing market</p><p>indicators and news to the end o September 2011. The data used in the charts and tables is the</p><p>latest available at the time o going to press. Sources are included or all the charts. We have used a</p><p>standard set o notes and abbreviations throughout the document.</p><p>Glossr o trms</p><p>nMstrm: mainstream property reers to the bulk o the UK housing market with, or example,</p><p>price movements monitored by reerence to national and regional average values.</p><p>nPrm: the prime market consists o the most desirable and aspirational property by reerence to</p><p>location, standards o accommodation, aesthetics and value. Typically it comprises properties in</p><p>the top ve per cent o the market by house price.</p><p>nThe Savills PCL index ocuses on resale properties so average values given in this document donot refect the prices being achieved or some o the very high quality new build schemes in core</p><p>prime central London locations.</p><p>nPCL = Prime central London</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 3/15</p><p>Prime central Londonsresidential stock hasseparated into grades.Savills Research</p><p>Svlls Rsrch | Prime Central London Residential 2005/2011</p><p>Wh w strt</p><p>th prm ctrl</p><p>Loo x </p><p>th lt 1970s, w</p><p>s tht prm</p><p>ws th bst proprt th bst</p><p>loctos. Lttl col w hv</p><p>thoght t th tm how mch ths</p><p>prm mrkt wol chg </p><p>sbsqt cs.</p><p>When I started analysing property</p><p>markets in the 1980s, prime London</p><p>centred around Knightsbridge.</p><p>The markets o South Kensington,</p><p>Chelsea and Belgravia were itsacolytes while Mayair (now the</p><p>star perormer o ultra prime) and</p><p>Kensington were distinctly ringe.</p><p>Most o Notting Hill and Marylebone</p><p>was denitely beyond the ringe.</p><p>The Savills prime London index has</p><p>thereore changed and expanded</p><p>over the years to refect these new</p><p>prime geographies.</p><p>What we have seen is the real</p><p>estate equivalent o the continuous</p><p>replacement o old companies with</p><p>new ones within the FT100 share</p><p>index to refect the share prices o onlythe biggest companies. In 2010, we</p><p>replaced our old sample o lower grade</p><p>properties with higher grade ones.</p><p>The ongoing reurbishment and</p><p>renewal o stock means a property</p><p>that might have been highly desirable</p><p>in the 1980s simply doesnt cut the</p><p>mustard now. Prime central Londons</p><p>residential stock has separated into</p><p>grades, an evolution that has had as</p><p>proound an eect as the physical</p><p>expansion o prime central London.</p><p>Last year we changed our sampleo index properties to refect this.</p><p>Dark basement fats and second-</p><p>foor walk-ups disappeared and</p><p>we increased the weighting o now</p><p>more numerous lateral conversions,</p><p>reurbished, high quality and new</p><p>developments that have changed the</p><p>ace o certain neighbourhoods and</p><p>in many ways changed the nature o</p><p>what we now call prime.</p><p>These grade A starred properties</p><p>are among the World Class property</p><p>gold standard. In seeking to</p><p>understand the prime central London</p><p>market it is important to understand</p><p>the divergent perormances o the</p><p>dierent grades. Lucian Cooks</p><p>excellent new analysis (page 8)</p><p>reveals the huge disparity betweenthe perormance o top grade and</p><p>lower grade properties.</p><p>It is this disparity in perormance that</p><p>has led us to review retrospectively</p><p>and re-state our prime central London</p><p>index, using the 2010 sample and</p><p>rebasing it at 100 in June 2005. This</p><p>was a relatively stable date in the</p><p>otherwise volatile market o the last</p><p>decade and a good place at which to</p><p>base our review o the last six years.</p><p>Replacing our old sample with the</p><p>new, upgraded sample rom this date</p><p>has had the eect o liting the index tonew heights.</p><p>Like the shares within the FT 100</p><p>share index, the sample o properties</p><p>within the Savills indices will continue</p><p>to change in order to refect the</p><p>changing nature o the prime London</p><p>market. Our analysis o the market</p><p>rom the point o view o grades, as</p><p>well as location; looking at values,</p><p>not just prices; and considering all</p><p>stock, not just traded properties, has</p><p>given us a multidimensional view o</p><p>the market. This helps us to makesense o the, sometimes surprising,</p><p>market movements o the last ew</p><p>years and the nature o the market</p><p>going orward. n</p><p>Foreword</p><p>HiGH fLyeRS</p><p>GeT an uPGRade</p><p>The Savills prime London index has changed andexpanded over the years to refect the new primegeography o Londons gold standard property</p><p>yol Brs</p><p>Head o Residential</p><p>Research020 7409 8899</p><p>ybarnes@savills.com</p><p>Contents04 Evolution and expansion</p><p>06 Six years o volatility</p><p>08 A divergence in perormance</p><p>10 All prime but not all equal</p><p>12 Prime Central London ranking</p><p>14 What lies ahead or PCL?</p><p>www.savills.co.uk/research 03</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 4/15</p><p>04</p><p>Market prole</p><p>evolution and</p><p>expansion</p><p>While the boundaries o prime have extendedbeyond central London, areas such asKnightsbridge and Belgravia remain at its core</p><p>th s rm r</p><p>l h</p><p> h 80 </p><p>mr y h</p><p> 10 r f h</p><p>mrk by , h mrk</p><p>fr h b r</p><p>r h b g </p><p>g r .</p><p>Average values o the properties in</p><p>our index stood at around 176,000</p><p>when the index launched and now</p><p>exceed 4 million.What we frst</p><p>described as prime defned the best</p><p>property in the best neighbourhoods</p><p>o core central London.</p><p>As such locations have increasingly</p><p>become the domain o international</p><p>owners and a store o global wealth,</p><p>so more central London property and</p><p>locations have achieved prime status.</p><p>In the early 80s only certain roads</p><p>or properties in then ringe central</p><p>London locations such as Notting Hill</p><p>were considered prime, but by the late</p><p>Noughties the bulk o housing stock</p><p>in the better roads had graduated to</p><p>prime status.</p><p>As international equity has colonised</p><p>portions o prime central London, so</p><p>domestic wealth has been displaced</p><p>into new areas, extending the</p><p>Over the past six years to the end o June 2011,</p><p>prime residential property prices in central Londonrose by 87%, even accounting or the downturn</p><p>o 2008. This growth compares to an average o</p><p>just 25% across the residential stock o London</p><p>as a whole.</p><p>Within the prime market the variance in</p><p>perormance has been signifcant. The top 10%</p><p>o properties by price growth rose by 151%.</p><p>The bottom 10% rose by just 42%. Much o the</p><p>variation relates to the period rom June 2005 to</p><p>June 2011 when price growth varied rom 33%</p><p>to 99%, though post downturn growth has varied</p><p>rom 31% to 54%.</p><p>While the variation between value per sq t was</p><p>modest in 2005, it has widened considerably as</p><p>dierent parts o the market have responded to</p><p>dierent demand drivers. As a result the premium</p><p>or scale has widened with units over 5,000 sq t</p><p>averaging over 2,300 per sq t and those below</p><p>1,000 sq t averaging less than 1,350 per sq t.</p><p>The highest growth has been seen by prime</p><p>property in Mayair, a market which has risen up</p><p>the rankings to deliver values competing with</p><p>Knightsbridge and Belgravia.</p><p>St Johns Wood has been more o a slow burner,with growth in line with the wider central London</p><p>residential market but below the average or prime</p><p>property in the area.</p><p>Looking orward, we do not anticipate a repeat</p><p>o the extraordinary growth o the past six years.</p><p>Nonetheless we expect prime property in central</p><p>London to lead the housing market recovery.</p><p>We expect the nature o the prime market to</p><p>continue to change as the organic expansion o</p><p>prime central London accelerates in response to</p><p>demand rom new sources o global wealth.</p><p>executive suMMaRY</p><p>The key ndings in this issue</p><p>Within the prime marketthe variance in perormance</p><p>has been signicant.Savills Research</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 5/15</p><p>s Rrh | Prime Central London Residential 2005/2011</p><p>savills.co.uk/research 05</p><p>A location-sensitive and</p><p>property-sensitive, ultra primemarket has emerged.Lucian Cook, Savills Research</p><p>boundaries o prime beyond central</p><p>London. Swathes o south-west</p><p>London have been gentrifed and</p><p>primed. First locations such</p><p>as Fulham and, more recently,</p><p>areas such as Clapham and</p><p>Wandsworth. New developments</p><p>have oten played their part in</p><p>extending prime boundaries or, as</p><p>with Wapping and Canary Whar,</p><p>created new prime markets. But,</p><p>without doubt, it is central London</p><p>that remains core prime.</p><p>cr l yTwo boroughs, Kensington and</p><p>Chelsea and the City o Westminster,</p><p>contain just 6.3% o Londons housing</p><p>stock but account or15.6% o its</p><p>value. Each hectare o Kensington and</p><p>Chelsea has on average more than</p><p>50million o housing stock and that</p><p>despite all the parks and green spaces</p><p>within the borough.</p><p>Other boroughs across prime</p><p>central London do not have the same</p><p>concentration o high value residential</p><p>real estate and the depth o the</p><p>prime market varies signifcantly rom</p><p>neighbourhood to neighbourhood.</p><p>Within core locations such as</p><p>Knightsbridge and Belgravia the</p><p>prime market is at its deepest.Away rom these areas the prime</p><p>market is more diluted, and there is</p><p>considerable variation in the nature</p><p>o housing stock.</p><p>Dierent grades o prime have</p><p>developed which have reacted</p><p>dierently to the volatile market orces</p><p>o the past six years. In this report we</p><p>explain how the importance o grade</p><p>has increased. Growth in prime central</p><p>London values has been signifcant</p><p>over the period, even accounting or</p><p>the downturn o 2008. But our new</p><p>analysis demonstrates that averagestell only part o the story.</p><p>A location-sensitive and property</p><p>sensitive ultra prime market has</p><p>emerged where addresses matter.</p><p>Certain markets, such as those</p><p>in Mayair, have risen rapidly up the</p><p>rankings in the past six years. Others,</p><p>such as St Johns Wood, are yet to</p><p>achieve quite such ashionable status</p><p>MAP 1.1</p><p>arg r l (r 750,000)Values refect the depth o the prime market</p><p>and have seen much lower growth</p><p>and arguably, thereore, have greater</p><p>potential or mid term growth.</p><p>Other locations which saw</p><p>gentrifcation and associated huge</p><p>value growth in the 90s, such as</p><p>Kensington and Holland Park, were</p><p>less responsive to the growth drivers</p><p>o 2006/07 than prime central London</p><p>as a whole. Subsequently they were</p><p>more aected by the downturn and</p><p>less responsive to recovery drivers.</p><p>Against this context we have</p><p>conducted a detailed review o the</p><p>composition o our prime central</p><p>London index and the perormance</p><p>o individual properties within it.</p><p>This has allowed us to urther our</p><p>understanding o the market and itsdiversity and nuances. Our fndings</p><p>are detailed in the ollowing pages </p><p>Data source: Land Registry / Savills Research</p><p>1.5m b</p><p>1.0m 1.5m</p><p>750k 1.0m</p><p>arg pr</p><p>Hyde Park</p><p>Regents Park</p><p>Rg prk</p><p>creates value hotspot</p><p>Myfr has developed</p><p>as a prime location over</p><p>the past six years</p><p>Kghbrg and</p><p>Bgr remain core</p><p>locations or overseas</p><p>investment</p><p>s Jh W yet to</p><p>maximise value potential</p><p>Kg and Hprk less responsive to</p><p>growthdrivers since 2005</p><p>RiverTh</p><p>ames</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 6/15</p><p>06</p><p>Perormance history</p><p>Six YearS</p><p>o volatilitY</p><p>From the summer o 2005 to the present day, thedramatic activity in the prime central London marketcan be divided into fve signifcant phases</p><p>Why s y w?</p><p>Bcus </p><p>h pd h</p><p>ps f s</p><p>ys nnu pc</p><p>mmns n h pm mks</p><p> cn lndn h d by</p><p>m hn ny m h</p><p>ps 30 ys.</p><p>1. Pre BoomTe st al o te Nougties saw</p><p>mainsteam ouse pices double,but</p><p>pime cental London ad moe mixed</p><p>otunes. By June 2005 annual picegowt in pime cental London ad</p><p>Domestic demand was uelled by</p><p>stong economic gowt and ecod</p><p>eanings in te nancial and business</p><p>sevices secto. In 2006/07 City</p><p>bonuses totalled some 11.5 billion</p><p>and muc o tis money went staigt</p><p>into London popety.</p><p>Oveseas equity continued to pile</p><p>into te pime London maket, wit</p><p>establised demand om Westen</p><p>Euope and te Middle East joined</p><p>by new money om te otunes</p><p>made in Easten Euope.</p><p>As a global city London sat at</p><p>te top o te list o wold nancial</p><p>centes and povided a benign tax</p><p>envionment o non doms. It was</p><p>also accessible, bot cultually and</p><p>politically, to a wide pool o wealty</p><p>intenational buyes. A eady</p><p>combination o signicant global</p><p>wealt geneation and a limited pool</p><p>o available popety dove pices to</p><p>new igs.</p><p>An ulta pime maket emeged</p><p>o te igt popety in te igt</p><p>location. Developments suc as Te</p><p>Knigtsbidge set new standads</p><p>o nis and acilities. Big became</p><p>beautiul as a pemium o scale</p><p>developed, wit lage units acieving</p><p>a signicant pice pe squae oot</p><p>pemium acoss bot existing andnew stock.</p><p>slowed to just 0.9%, leaving values just</p><p>23% above tei June 2000 level, as</p><p>te global maket o PCL was ocked</p><p>by a succession o events, including</p><p>te busting o te dot com bubble,</p><p>9/11 and te wa in Iaq.</p><p>2. The BoomTwo yeas o apid pice gowt</p><p>ollowed o pime cental London, on</p><p>a scale not seen at any ote point in</p><p>moe tan 30 yeas tat Savills as</p><p>monitoed te maket</p><p>In te 30 monts to Septembe</p><p>2007, esidential values in pimecental London ose by 64%.</p><p>GrAPh 2.1</p><p>Quy pc gwh PCl snc Jun 2005 Prime London outperorms the mainstream market</p><p>Gap souce: Savills reseac</p><p>Jun-05</p><p>Sep-05</p><p>Dec-05</p><p>Mar</p><p>-06</p><p>Jun-06</p><p>Sep-06</p><p>Dec-06</p><p>Mar</p><p>-07</p><p>Jun-07</p><p>Sep-07</p><p>Dec-07</p><p>Mar</p><p>-08</p><p>Jun-08</p><p>Sep-08</p><p>Dec-08</p><p>Mar</p><p>-09</p><p>Jun-09</p><p>Sep-09</p><p>Dec-09</p><p>Mar</p><p>-10</p><p>Jun-10</p><p>Sep-10</p><p>Dec-10</p><p>Mar</p><p>-11</p><p>Jun-11</p><p>Sep-11</p><p>-6.0%</p><p>-3.0%</p><p>0.0%</p><p>3.0%</p><p>6.0%</p><p>9.0%</p><p>12.0%</p><p>-9.0%</p><p>Pm Cn lndn UK mnsm</p><p>QuarterlyGrowthPrimeCentralL</p><p>ondon</p><p>P Bm</p><p>Quately gowtpeaks at 11.1%</p><p>8.3% all postLeman botes</p><p>th Cunch</p><p>rpd rbund rnwd vyth Bm</p></li><li><p>8/3/2019 Spotlight on Prime Central London Residential Oct 2011</p><p> 7/15</p><p>Ss rsch | Pime Cental London residential 2005/2011</p><p>savills.co.uk/eseac 07</p><p>It is unlikely that we have seen the end o</p><p>price volatility even though the undamentalslook sound in the medium term.</p><p>Yolande Barnes, Savills Research</p><p>3. The CrunchTe cedit cunc bougt tis</p><p>dizzying gowt to an adupt alt.</p><p>As City eanings and employment</p><p>secuity plummeted and te wealt</p><p>o te intenational elite was eoded,</p><p>so tansaction levels ell damaticallyand buye condence in te</p><p>undelying wot o cental London</p><p>popety waned. Values ell 21% in</p><p>just 18 monts, ecoding a single</p><p>quate all o 8.3% in te wake o te</p><p>Leman Botes collapse.</p><p>4. Rapid ReboundIn Mac 2009 pospects looked bleak</p><p>and ew commentatos anticipated</p><p>te tunaound to come as a</p><p>staggeing pice gowt o 25.5%</p><p>occued in just 12 monts.</p><p>Te excange ate advantage tataccompanied te weakness in te UK</p><p>economy was a stong ealy catalyst</p><p>o oveseas investment, mioing</p><p>wat ad been seen ate pevious</p><p>maket downtuns.</p><p>Pime cental London esidential</p><p>popety came to be viewed as a</p><p>distinctly sae aven o intenational</p><p>wealt and an attactive altenative</p><p>to gold. Even te intoduction o a</p><p>non doms levy ad little i any impact</p><p>on sentiment.</p><p>Economic uncetainty in te</p><p>Euozone dove wealt to te makettoug 2009 and 2010. Demand</p><p>came om acoss Westen Euope,</p><p>but most notably om Italy as a tax</p><p>amnesty at ome tiggeed an infux</p><p>o Italian money eleased om Swiss</p><p>bank accounts, and om Geece,</p><p>as it became evident tei domestic</p><p>economy was singled out as te</p><p>most likely to deault.</p><p>Te ebuilding o global wealt onte back o stong commodity makets</p><p>pumped moe equity into cental</p><p>London. By 2010/11 bot te...</p></li></ul>

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