London’s property market reaching for the skies as high-rise back in vogue

London is experiencing a resurgence of high-rise living – driven by a need to build up rather than out – with 13,600 residential units currently under construction in new towers in the capital, according to a leading property consultancy.

CBRE also revealed that there a further 70,000 units now in the planning pipeline, enough to meet the Mayor of London’s housing target for two years. The move towards constructing taller residential towers has been ignited by an upsurge in land values in London, with a consequent need for developers to be more efficient with their sites.

Tower developments are increasingly synonymous with luxury living and being higher up can add substantial value to units. This means that end values can more frequently support the higher build costs attached to towers.

Research also found that towers are emerging in clusters, a trend driven in part by planning policy, which drives tall buildings to the central activity zone and opportunity areas. It also guides them away from sites in the viewing corridors designated in the London Plan, which guard views of the river and existing skyline. Clustering is driven by local values, with locations close to the river particularly attractive to buyers and, therefore, to developers.

Said Jennet Siebrits, Head of Residential Research at CBRE: “Despite the higher build costs associated with developing high-rise, developers have recognised the increased premium that these developments can expect to enjoy, making them increasingly viable. Through examining the unit by unit pricing of 15 current and recent schemes across a range of price points and specifications, CBRE has calculated an average price premium per floor of 2.3 per cent. The largest ‘tower premium’ was achieved on the highest specification and value product, ranging between 1.3 and 3.25 per cent.”

Why purchasing prime real estate in London can be a postcode lottery

New research on postcode sectors in Prime Central London (PCL) ranks SW1 X in Belgravia as most expensive, whilst W1 D and W1 F in Soho has the highest long term growth history and W1 T and W1 W in Fitzrovia win top investment postcodes.

A snapshot of the PCL residential property market, made up the Royal Borough of Kensington and Chelsea and the City of Westminster, reveals that the average house price reached £1,552,400 in the first quarter of 2014, said specialist investment advisor LCP in June. Prices have increased on average 10.64 per cent per annum over the last two decades or so, since Land Registry records were first published in 1996.

LCP added, however, that even within the small designated area of PCL, average prices and long term growth vary significantly amongst the 200,000 properties located within it.

It comes as no surprise that LCP’s careful analysis shows that postcodes located within the international heartlands of Belgravia, South Kensington and Knightsbridge reign supreme in terms of average price. The SW1 X(7,8,9) area of Belgravia posted the highest average price £4,405,741. This rose from second place pre-credit crunch, replacing the SW3 6 postcode in Chelsea, which at £3,448,195 is now rated as the third most expensive.

In second place is the SW7 (1,2) postcode in Knightsbridge, around Ennismore Gardens and Imperial College with an average price of £4,064,674. Reflecting the vast price diversity in PCL, the SW1 V3 area of Victoria that runs alongside the River Thames posted the lowest average price of £593,600, almost 7.5 times lower than the most expensive postcodes.

In terms of best long term investment, LCP has identified that W1 (T,W) in Fitzrovia, which runs between Portland Place and Tottenham Court Road, as the number one spot. An area that has been historically under-priced and over-looked compared with other places in PCL, it has an average price of only just over £1m (£1,132,089) whilst enjoying long term annualised growth of 12.37 per cent per annum.