All 'prime' but not all equal

17 October 2011

‘Prime central London’ describes the best properties in the best central locations but a new study published today by Savills reveals a huge divergence in price growth between the top performing properties and the worst, even within the confines of this tightly defined geographical area. 

In brief:

  • Values of prime central London resale properties rose by 87% on average across the volatile period of the last six years compared to 25% for mainstream London 
  • The top 10% of prime central London residential real estate, ranked by price growth, rose 151% in six years, and has recovered 57% since the bottom of the market in March 09
  • The bottom 10% has seen values rise by 42% in the six year period, and 34% since March 09
  • Mayfair outperformed on price growth, up 117% on average in six years, while St John’s Wood rose by just 69% suggesting unfulfilled potential
  • Knightsbridge leads in terms of average price per square foot, at £2007 (note: this does not include the record-breaking new build properties)

The Savills prime central London index showed average price growth of 87 per cent in the six years to mid 2011, significantly higher than the average for the total London residential market which grew 25 per cent. Detailed analysis of the period reveals price growth of 151 per cent for the top 10 per cent of the prime central London market ranked by price growth, compared to just 42 per cent price growth recorded in the bottom 10 per cent.

Price per square foot values have polarised, with price growth for top properties and locations hugely outpacing the lower end of prime. Average prices ranged between £900 and £1,000 per square foot across the index in 2005, but now range from an average of £1,400 in the bottom decile to over £2,350 per square foot at the top.

“This analysis suggests that investors in prime central London need to look beyond the headline averages for real comparables in order to understand value,” says Lucian Cook, director of Savills research.  “The extent of the divergence in performance is too big to ignore.”

Deepest strands of prime revealed
Mayfair has shown the sharpest growth in the past six years, up by 117 per cent on average, followed by Marylebone at 107 per cent and Knightsbridge at 93 per cent.  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. 

“Mayfair has become an increasingly popular asset class amongst the wealthiest London buyers,” says Jonathan Hewlett, Savills head of agency in the central London market.  “It has been helped by a general improvement in the amenities the area offers to wealthy residents, whether they live there full time or for only part of the year.”

View the Savills Prime Central London index

It should be noted that the index focuses on resale properties so the average values do not reflect the prices being achieved for some of the very high quality new build schemes.  Knightsbridge, very much a commercial and retail location a decade ago, has become a magnet for high net worth international buyers and a number of high profile schemes have smashed all previous records.  It remains to be seen whether other locations can emulate this success. 

By contrast, values of prime property in St John’s Wood rose by a more modest 69 per cent over the six years to June 2011.  Says Cook, “This is in line with the wider market for central London as a whole and reflects a broader mix of properties in the area.  However recent buyer demand in these locations, particularly from international investors, and the rise of high value trophy homes suggests lower performing areas such as this have not yet fulfilled their value potential.”

Notably, in the past 12 months Regent’s Park has shown growth of 16.1 per cent compared to the prime central London average of 13.6 per cent, a sign the northern segment of prime central London is moving up the ranks of prime.

An identifiable premium for houses of scale
The biggest headline growth figures are revealed only by analysing individual types of property.   Large houses in Mayfair, in excess of 10,000 square foot, beat all other categories, growing by 150 per cent in six years, a reflection of the value of rarity and scale to high net worth international investors.  Such properties now command between £2,500 and £3,500 per square foot compared to £1,800 to £2,100 for the best performing flats in similar locations.

In general terms houses have outperformed, but there have been pockets of high performing flats.  Flats within Knightsbridge and Belgravia have been amongst the best performers, attracting buyers from the Middle East/North Africa and Eastern Europe/CIS regions.

Within these areas flats have been developed to meet the demands of the ultra wealthy international buyer and have achieved record prices as a result.  The Knightsbridge, reselling at current values of between £3,500 and £5,000, set new standards at launch.  Undoubtedly, new developments such as this, followed by One Hyde Park, have raised the bar and pulled up values for the closest comparable properties.   Flats with the most famous, established prime addresses, such as Eaton Square, have seen values rise by 130 per cent in the last six years.

Looking forward Savills expect this variation in performance to continue in the short term.

 “While all properties are susceptible to market shocks, it will be the quality of location and property, as well as its ability to meet the deepest and strongest strands of demand that will determine how it is priced relative to competing stock on the market,” says Cook.

“Over the past 18 months we have seen a net inward investment by international buyers of almost £6 billion, predominantly from investor buyers attracted to London as a safe haven.  They are adopting a holding position that is reducing the stock in circulation in the market.  In the event of a downturn, this should help shield the best properties and locations from the worst of the falls and ensure a more pronounced recovery.”

View the full research report

For more information, please contact:
Sue Laming, Savills Press Office, 020 7016 3802/07946 635866
Lucian Cook, Savills Residential Research, 020 7016 3837
Yolande Barnes, Savills Residential Research, 020 74009 8899


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Key Contacts

Lucian Cook

Lucian Cook

Residential Research

Head Office London

+44 (0) 20 7016 3837


Yolande Barnes

Yolande Barnes

World Research

Head Office London

+44 (0) 20 7409 8899