The expansion of prime

With the wealthiest homeowners competing for space, a lack of housing supply means the size of London's prime market is constantly expanding.

12 September 2013, Words by Yolande Barnes


Our latest edition of Spotlight focuses on the expansion of London's prime residential markets. Download here.

London is seen as one of the premier world cities in which to both live and invest. London’s economy has been put at nearly a third the size of that of the whole of the UK.

Its global reach feeds the strong economy. Like other global cities, London attracts capital from around the world, which is invested in its businesses and enterprises. Some of this capital is human capital; 36% of Londoners were born overseas and, in four boroughs, the figure is over 50%.

The demand catchment for London housing is therefore global and the appetite for investment remains strong. So it is not surprising, because London is physically limited in size and by very low levels of new supply, that real house prices have risen much faster in Greater London, averaging 3.6% above inflation each year since 1979, compared to the UK average of 2.9%.

More striking than this though is the performance of prime central London house prices, which have risen above the rate of inflation by an average of 4.9% per annum. This performance makes London a honeypot for wealthy real estate buyers but many of these buyers also live and work in London.

It would seem that London’s housing market is inextricably tied with its economic success but it has been failing for some time to increase supply at a sufficient rate to curb price growth.

This lack of housing supply is playing out most visibly in London’s prime housing markets where the wealthiest homeowners can compete most effectively for space. This has the geographical impact of enlarging the area we call prime London – on an almost annual basis.

The prime market that was confined to little more than Belgravia in the 1950s, now covers a swathe of the best properties from Richmond in the south west to Islington in the north east, from Chiswick in the west to Canary Wharf in the east.

New, novel or next door

If you want to spot where the next prime areas are likely to be, look for places that are ‘Novel, New or Next Door’ or a combination of all three. By ‘Novel’, we mean newly fashionable areas, usually pioneered by the ‘creative classes’ of various types (artists, tech entrepreneurs, even financial creatives). Good examples at present are Shoreditch, Dalston and Brixton.

‘New’ is areas experiencing regeneration. Locations surrounding good large development schemes usually see value uplift – provided the nature of the location changes as a result. Good examples are the Kings Cross development or infrastructure improvements like the East London line. ‘Next door’ means locations with much lower prices than their neighbouring area, which have a greater propensity to rise than those in an homogenous price band.

Good examples of this can be seen down the Kings Road as value migrated from Sloane Square in the 1900s, Chelsea SW3 in the 1960s, Chelsea SW10 in the 1980s, Parsons Green in the 1990s and Fulham in the Noughties.

This report focuses on what has happened in these new and old prime markets of inner London, what forces are driving them and where they might move in future.


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Key Contacts

Yolande Barnes

Yolande Barnes

World Research

Margaret Street

+44 (0) 20 7409 8899


Lucian Cook

Lucian Cook

Residential Research

Margaret Street

+44 (0) 20 7016 3837