International buyers looking for property investments in London are increasingly seeking out large apartments, typically with over 5,000 sq ft of space. At the same time, Savills has revealed overseas investors are the driving force behind the new-build residential market in the UK's capital, so does this mean the city is about to see a wave of developments to cater to this demographic?
Earlier this month, managing director of Berkeley Urban Renaissance Paul Vallone told Reuters high-net-worth individuals coming into London from abroad want to have a similar amount of room in their city flat as they would in a home elsewhere. "International purchasers accustomed to large riads or dachas are now expecting their London property to be as spacious as possible," he stated. Knight Frank highlighted the change in direction by developers, noting in 2000 the average size of a luxury apartment in the capital was 3,000 sq ft, and this had risen to 5,000 sq ft by 2007. According to the firm, buyers are presently looking for 6,000 sq ft apartments.
Stephen Dyer, managing director of Ideal Property, commented developers are following the money by catering for this new market of super-rich individuals. "All the publicity seems to indicate that if you go big and special, then it's the very wealthy people who are coming over to the UK to buy them," he added. Knight Frank has predicted the price per sq ft for high-end, new-build property in the City area will increase from GBP 800 to GBP 1,750 by 2016. Meanwhile, research published by Savills at the start of February revealed international purchasers were responsible for a net inflow of equity totalling GBP 1.4 billion last year, demonstrating the popularity of the super-prime London residential market.
The firm noted, while international buyers accounted for around 63 per cent of transactions in the city's new homes market, at the top end - for properties valued at GBP 5 million or more - they accounted for 88 per cent of sales. Yolande Barnes, head of Savills research, asserted: "Wealthy individuals are likely to continue investing in overseas assets to safeguard their cash and provide themselves with an alternative living option, and while London retains its status as a leading global financial centre, its residential real estate will continue to be an asset of choice." Chief executive of London Central Portfolio Naomi Heaton agrees, noting the capital's reputation as a cosmopolitan city, in addition to its numerous attractions and excellent educational establishments, makes it a destination of choice for those with money elsewhere in the world.
With London already a highly-developed city, is there space for these new super-size apartments to be constructed? Mr Dyer believes developers will need to find a way to accommodate the demand, pointing out many of the units in proposed schemes have already been sold, so "it's simply a matter of developers deciding what space they're going to allocate to the developments they're already committed to". According to the most recent Drivers Jonas Deloitte London Residential Crane Survey, the development pipeline is more robust this year than in 2011, although the firm warned a number of schemes slated for completion in 2012 are likely to rollover into 2013.
The organisation also highlighted the reduction in the amount of affordable housing being constructed in the capital at present, with this type of home accounting for less than 40 per cent of all new-build schemes. In addition, completions in the final quarter of 2011 were dominated by apartments, with houses making up just five per cent of the new properties entering the capital's market. Marylebone and Regents Park were cited as the two most sought-after districts for property investment in London by Savills last month, with Mayfair, Kensington, St John's Wood, Knightsbridge and Chelsea named as "warm" locations in which to purchase real estate.
- Thursday 16 February 2012