First-time buyers may be scrambling for all the help they can get for a foothold on the property ladder but at the opposite end of the market the landscape looks remarkably different.
The top-end London property market is awash with money. Demand for multi-million pound houses and luxury apartments in prime areas of the capital is at a record high.
Since the summer, estate agents say prices of the most desirable properties in Kensington and Chelsea are rising by as much as 10 per cent every few weeks. Rightmove, the property website, says that the price of the average property in the Royal Borough has risen almost 50 per cent in the past year – to more than £1m.
Howard Elston, an agent with Aylesford International, says: “This market is being driven by an explosion of wealth coming from all sorts of areas.”
He says there is an extraordinary amount of money being generated in the City. The best performers in mergers and acquisitions, private banking and commodities trading are set to receive 30 per cent increases in their year-end pay packets, according to Armstrong International, an executive search firm. More than 4,000 workers are likely to receive bonuses of at least £1m, according to some predictions.
But healthy bonuses are just one of a number of factors affecting the unique high-end London market. Elston says the impact of City bonuses is most obvious in the £5m-£10m property bracket. But the very top end market – properties going for tens of millions of pounds – tends to be dominated by international buyers, directors selling their companies or sports and film stars.
“There is a huge amount of foreign money coming in and it’s not just the Russians. There are also lots of very wealthy Europeans, especially Germans, Italians and Scandinavians,” he says.
Buyers are also coming from the Middle East, China and interest is expected from India after the relaxation of rules governing how much capital can be taken out of its domestic economy.
Property buyers are being drawn to London’s cultural heritage, its desirable period architecture and fantastic transport links to virtually everywhere in the world. “People want to live here, they want to educate their children here,” says Elston. Other buyers simply want a trophy address to add to their portfolio of global properties.
But as demand for these properties reaches unprecedented levels, agents say there is an increasing problem with supply.
Mark Goldberg, London sales director at Hamptons, says: “There are absolutely record numbers of buyers coming in but the supply continues to dry up. People are fighting over every property we take on.”
According to Land Registry figures, property sales over £2m currently account for only 0.1 per cent of total sales. In the three months to the end of June this year, in England and Wales there were just 209 sales in excess of £2m.
Most highly desirable properties are now getting multiple bids and many are going for hundreds of thousands of pounds over the asking price. Goldberg says there can often be eight or nine people willing to pay above the asking price: “People are having to compete dramatically.”
As a rule of thumb Goldberg says properties in prime central London have increased by 20 per cent over the past year but there are frequent examples of 30 per cent-plus profits.
Aylesford International is marketing a seven-bedroom terraced house in Wilton Crescent, near Belgrave Square, which includes two wine vaults, a cinema and a separate “mews” that houses a one-bedroom flat. The property was initially on sale for £12m. The vendor received the asking price reasonably quickly, rejected it and has now remarketed the property at £15m.
Agents say that a trend has appeared where selling prices are often being determined by vendors rather than the real value of the property. “Vendors are coming to us with prices in mind that agents think look too high but they keep getting those prices if not more. It is difficult to keep pace with prices that are moving forward so fast,” says Elston.
He adds that around one in three transactions are seeing gazumping, while 10-20 per cent of deals are going to sealed bids. Even after a sealed bid has taken place, it is not uncommon for a rival buyer to come back with a better offer, he says.
Larger numbers of buyers are turning to private property finders such as Garringtons and Oakhall to help them source suitable properties. Many properties are being snapped up before they are even marketed. It is also becoming more common for property finders to target the owners of specific properties that their clients have singled out.
Paul Tabor, managing director of Garrington, a high-end property finder, says: “Property prices are not being dictated by the true value of the property but rather whether they fit into the lifestyle of the buyer. People will pay what they have to, to secure the property they want.”
Agents say that the high-end London market is now attracting a much younger, financially astute type of buyer who, once they have secured their dream home, sees no advantage to selling up.
Ed Mead, director at London agents Douglas & Gordon, says that the thought of giving the chancellor hundreds of thousands of pounds in stamp duty is a big deterrent to move. Buyers are often rich enough to hang on to the property for a generation.
There is also a very limited amount of property that satisfies these super-rich buyers’ tastes. Mead says that buyers, especially foreigners, are typically after a “trophy London address”, a handful of streets across Kensington, Chelsea, Belgravia and Knightsbridge.
The increase in prices is rippling further out to places such as Battersea, Wandsworth and Clapham. Agents also say properties lower down the ladder in parts of the south-east and even East Anglia are also seeing the benefit as some London homeowners sell up and move out.
But it is the most central and most expensive properties that are seeing the greatest demand. Paradoxically, as these properties have the tightest supply so prices keep spiralling upwards faster and faster.
Paul Welch, managing director of Clegg Gifford Private Clients, a mortgage broker, says the company is now taking an application for a mortgage of at least £1m every day. The biggest mortgage CG has written this year is £7m. The majority of buyers, however, are paying with cash, especially in the £3m-plus market.
Agents and brokers say the huge disparity between demand and supply means there is little likelihood of a slowdown in growth in this market any time soon. “What will change things? The only thing would be a catastrophic terrorist attack,” says Elston.
Tabor compares prime London to some of the most sought-after country hotspots in Dorset and Cornwall, where the locals can no longer afford to buy their own properties. “Central London is becoming the country village of the world,” he says.
