Buy-to-let growing in London, with prime central homes attracting wealthy foreign tenants

London has recorded a sharp increase in buy-to-let investors over the past two years, according to a leading estate agency in the city, who added that in the first quarter of 2014, 26.2 per cent of its buyers in Chelsea were purchasing property for investment, compared with just 2.3 per cent of buyers in Q2 2012.

“The rental landscape in prime central London is fast changing,” said Zoe Rose, Head of London Lettings at Strutt & Parker. “Investors are no longer fixed on chasing high rental yields and are happy to invest for the capital growth alone. Consequently, investors are incorporating larger family accommodation into their portfolios, resulting in more family houses coming to the market.”

According to Strutt & Parker, their tenants in London rent on average for 29.8 months, far longer than the national average of 20 months (according to ARLA), with the majority in London in their 20s and 30s.

The ultra high-end sector of the ‘trophy’ prime central lettings market is also active – examples include a 10,000-sq-ft penthouse in Knightsbridge and a nine-bedroom newly refurbished property in Rose Square in Chelsea, both currently available for £25,000 per week.

This sector of the market is increasingly fast-paced with the most coveted rental properties going to sealed bids and even being let without ‘physical’ viewings – mirroring the buoyant sales market in London.

Seventy per cent of Strutt & Parker’s landlord base is British, whereas 75 per cent of its tenants are international – often from France, Italy and Spain – which is driving some interesting changes in the marketplace.

“Renting is the norm in prime European cities like Paris, Milan and Barcelona,” added Ms Rose. “And the influx of young and affluent international tenants flowing into London is driving up standards in the capital as their expectations of rental property are very high. We describe this tribe as the ‘GloMads’, Global Nomads who are open to travelling from place to place over longer periods of time, often for employment.”

London’s $101.5million luxury property market makes it the world’s No.1

London has topped the rankings of luxury property markets in the world, recording the highest value sales during 2013, according to a report from a leading international property consultancy.

Christie’s International Real Estate report presents in-depth analysis of the world’s top 10 luxury property markets, namely France’s Côte d’Azur, Hong Kong, Los Angeles, Miami, New York, Paris, San Francisco, Sydney, Toronto and London. Each market was ranked across key metrics, including record sales price, prices per square foot, percentage of non-local and international purchasers, and the number of luxury listings relative to population.

London topped the Index with the highest record home sales price of all the cities investigated – at $101.5 million. Square foot prices in London were also higher than any other city in 2013, averaging $4,683, which is significantly greater than the second highest found in Hong Kong at $2,578.

Furthermore, the entry price point for luxury property in London was found to be the highest of any market analysed, at $7.8 million. London also saw a 20 per cent year-on-year rise in the number of luxury property sales in 2013, racking up 5,693 properties in total.
Price increases and supply constraints did little to detract buyers in prime Central London as 2013 recorded the highest number of home sales since the 2006 peak, with significant growth in high priced transactions.

Second home buyers accounted for 48 per cent of buyers in London – attributed to a surge in high net worth individuals from turbulent markets looking to move equity into stable and currency-favourable locations.

Sales of prime London property still rising in 2014, fuelled by Asian buyers

Appetite for luxury real estate in London continues to rise, after a report by a leading property consultancy showed that 834 homes were sold in Prime Central London (PCL) during the first quarter of 2014, representing an 8.3 per cent increase over the quarterly average for the past ten years.

In the first three months of 2014, the sub-£2million market saw a slight dip – likely to be due to the late Easter holiday – whilst the £2million-plus didn’t appear to be affected, said Strutt & Parker in its report.

Stephanie McMahon, Head of Research at Strutt & Parker, said: “Although the sub-£2m market stalled this quarter, the £2m-£5m and £5m-plus have seen exceptional growth both in values and volumes compared to the same period last year. We have seen a dramatic 47.2 per cent increase in the value of homes sold during the first quarter compared to the quarterly average for the past ten years.”

Nearly 45 per cent of all Strutt & Parker buyers in central London in the first quarter of 2014 originate from overseas. Comparing this quarter to the first quarter of 2013, there was a 31.4 per cent increase in buyers from Asia (highest in the Knightsbridge and Belgravia area) and a 20.8 per cent decrease in buyers from the Middle East.

Chelsea, South Kensington and Fulham have seen the greatest quarterly value of properties sold since 2001. When looking at the quarterly averages for the past ten years, Chelsea, South Kensington & Fulham saw a 65 per cent increase in values, with a 17 per cent increase on the number of properties sold. Kensington & Notting Hill also performed strongly, whilst Knightsbridge & Belgravia surprisingly saw a slight dip with a 1.1 per cent decrease in value of transactions, and a 26.7 per cent decrease on the number of homes sold.

Lettings slowed down slightly on last year with 2,912 lets agreed, representing a 2.2 per cent decrease. One reason for this could be that tenants who secured good rental levels a year ago have seen no motivation to relocate to new properties with potentially higher rates. There has also been a reduction in corporate rentals likely due to larger companies evaluating internal viability. Notable was a significant increase of 6.6 per cent in houses let in Chelsea, South Kensington and Fulham compared to the first quarter of 2013.

PCL prices are expected to rise by around 6.5 per cent in 2014, but to drop back to 2 per cent growth in 2015, as political uncertainty emerges ahead of the General Election. These forecasts are a stark contrast to 2010 and 2011 when PCL house prices surged by over 13 per cent year-on-year.