Luxury London Period Properties Outperform New-Build Apartments – Survey

Stephen Little

11 August 2014

Luxury period properties in London’s long-established and most expensive neighbourhoods have appreciated by as much as 30 percentage points more than new-build flats in high-end developments in Central London since 2009, according to new research by specialist prime residential property investment advisor .

The research found that flats in prime Central London have appreciated by 57.4 per cent since 2009 to the end of the first quarter 2014, with properties in some top-tier established period districts rising by as much as 78 per cent. In contrast, re-sale prices for new-build apartments built in Central London’s prime residential neighbourhoods in the past decade have climbed by 46.2 per cent over the same period.

The study revealed that period flats in Belgravia, Chelsea, Kensington, Knightsbridge, Marylebone, Mayfair, Notting Hill and South Kensington all outperformed the price appreciation per square foot of luxury new-build apartments in prime Central London. More than two-thirds of the housing stock in these eight “period neighbourhoods” was built before 1900.

The report noted that successful sales campaigns by developers targeting wealthy Asian buyers had helped to fuel a surge in demand for luxury flats in new developments in prime Central London. This has lifted the price of these properties to £1,501 ($2,519) a square foot, or 9 per cent more than the average price fetched by flats across the rest of prime Central London.

Oliver Hooper, founder and managing director of Huntly Hooper, said that buyers should consider their investment options “more widely” before signing on the dotted line for the latest new-build apartment in prime Central London as a result of period properties outperforming the average of their new-build peers.

“There is limited scope to negotiate down prices for new-build luxury flats and the current market dynamics mean developers with strong balance sheets can achieve a premium in pricing relative to existing prime housing stock,” Hooper said.

The report showed that while the appreciation in values is more muted for new apartments, they generate a better average gross rental income return of 2.6 per cent compared to a 2.1 per cent return for flats in established period neighbourhoods, as well as being quicker to lease.

However, Huntly Hooper warned investors should be aware that the superior rental return might be eroded by the higher service charges that come with new developments.

“Opportunities to lock in far superior investment returns from London’s prime residential market currently lie generally in the period neighbourhoods and the inefficiencies this asset market provides. Things change quickly and each neighbourhood market is different, which is something that investors need to consider when they invest in London property," said Hooper.

Huntly Hooper drew on data on 55,000 sale or leasing transactions from the Land Registry and Lonres to track the investment performance of properties in prime Central London and the smaller group of period neighbourhoods.