The latest Savills report on prime central London property prices showed average growth at 87% over a period of six years, up to the second quarter of 2011, demonstrating significantly higher growth than general London residential markets, recorded at 25% in comparison. Urban Exposure’s Daljit Sandhu comments: “the London market is complex and diverse. Investors need to have a detailed understanding of markets within markets and ensure they have conducted extensive research into the specific location they are considering.”
A more in-depth review of the data generated by the Savills PCL index, shows that over the same period, the top 10% with the highest price growth achieved an astonishing 151% increase, while the bottom 10% recorded respectable, but far less exponential growth of 42% in comparison.
Breaking these figures down further reveals the dichotomy between existing prices per square foot within PCL. In 2005 it was reported that average prices were between £900 and £1,000 per square foot, but the latest figures from Savills now show the polarisation between the higher and lower end of PCL; ranging from £1,400 to £2,350 on average, a significant disparity, demonstrating that the top 10% of properties marketed in prime central London are outstripping the prices of the other 90% within the same sector.
As Lucian Cook of Savills research explains: “this analysis suggests that investors in prime central London need to look beyond the headline averages for real comparables in order to understand value. The extent of the divergence in performance is too big to ignore”. According to news site Property Wire, there are three key areas, in particular Mayfair, that have proved to be the most expensive, appealing to wealthy buyers and investors because of their range of improved amenities:
“Mayfair has shown the sharpest growth in the past six years, up by 117% on average, followed by Marylebone at 107% and Knightsbridge at 93%. This price growth puts Mayfair in third place on values, with average values at £1,960 per square foot, behind Knightsbridge at £2,007 and Belgravia at £1,982.”
Although the index only incorporates resale values, and excludes properties marketed under new build schemes, it provides an insight into general market conditions within PCL, and more specifically the existence of another asset class within this particular market, as the growth demonstrated by the top 10% within this sector continues, seemingly unchecked.
As Daljit Sandhu from Urban Exposure goes on to explain:
“We have looked at a number of projects in Mayfair for example, and generally concur with the price increases recorded by Savills; but even in this relatively small location of the market, there’s a good part – in and around Mount Street, and a secondary market, in and around Shepherds Market.”
Daljit Sandhu is a Director at Urban Exposure, who specialise in providing mezzanine finance, for more information visit: http://www.urbanexposureuk.com/en/finance/mezzanine-finance/