The London Residential Market
In the last 12 months the central London residential market has performed
well, with prices rebounding faster than the rest of the country as a
result of demand continuing to outstrip supply.
Average house prices in London have grown by 12% over the last 12
months. Prices in London are substantially higher than the rest of the
UK and currently stand at £430,000 compared with the national average
of £246,000.
A map showing average house prices in central London, by area is
shown below.
Source: Land Registry (blank spaces denote no data, as a result of no flat transactions in Q3)
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Future Demand
As London continues to grow as one the world's leading financial
cities, there is perennial demand for residential property in Central
London from owner occupiers and investors, either from home or
abroad.
When considering the market for the new development at One
Blackfriars, a significant proportion of domestic purchasers will be
from the City. Although there were fears that City bonuses would be
harnessed by measures implemented by the government in last year's
budget, these have not really materialised.
The Centre for Economics and Business Research has estimated that
the bonus pool for the City for 2010-11 is up to £6.8bn. This should in
turn result in a revival of interest in residential property that would be
used for owner occupation or rental investment.
Over the last two years international buyers have been fundamental
to the performance of the London residential market and now
considerably out-number domestic buyers, particularly on prime
property.
New developments are currently being directly sold to the overseas
market, in particular parts of the Far East, namely, Hong Kong,
Singapore and Malaysia.
The impetus behind current international activity is largely a result of
global economic conditions, in particular the weakening of sterling.
For example, buying a prime property now in Westminster with Hong
Kong dollars is around 20% cheaper than 2008 peak prices.
Other than for investment purposes, other overseas purchasers are
seeking to acquire a property in London for their children, who have
chosen to study over here. This provides a housing solution during
their studies and also gives them a long term investment asset.
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The Southbank Residential Market
Today, Southbank is considered to be a prime stretch of the River
Thames and is now one of London's key cultural icons and is home to
big business.
New luxury developments in the area have achieved record prices and
Southbank is now considered as prime central London residential
territory. Typical buyers today range from employees from the City's
financial district to overseas investors from South East Asia.
With the residential development pipeline being fairly restricted,
developments of the highest quality are now able to command values
that you would typically find in other prime London locations such as
Kensington, Chelsea and Westminster.
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Comparables and Exemplar Tower Developments
At present the Southbank new build residential sales market is dominated
by The Grosvenor Estate/Native Land scheme, Neo Bankside. This iconic
Rogers Stirk Harbour scheme is adjacent to the Tate Modern and consists
of 200 apartments. The scheme is currently being sold off plan and most
recent sales suggest average pricing at £1,400psf. Whilst the scheme is
not directly overlooking the River Thames, a number of the higher level
apartments will enjoy river views. The tallest block at Neo Bankside is 24
storeys high.
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Height and Aspect Premiums
When analysing the pricing of schemes such as Neo Bankside, it is clear
that height and aspect premiums exist in new developments.
For example, whilst the average pricing at Neo Bankside is £1,400psf, this
can increase to £2,000psf for north facing units that benefit from river
views.
Furthermore, additional height also adds value, typically £50,000 differential
per floor for two and three bed apartments.
Comparable Tower Schemes
The proposed development at One Blackfriars will create one of London's
tallest residential buildings at 52 storeys in height.
When considering the potential value premium that tower schemes are
able to achieve, it is important to consider other residential tower
schemes in central London and compare their pricing regimes, compared
with more traditional forms of new housing development.
In the table set out below is information relating to three residential tower
schemes in central London, which highlights pricing differentials between
them and more traditional housing schemes.
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Residential Values at One Blackfriars
The residential element of the One Blackfriars tower will offer purchasers:
- Iconic architecture
- Panoramic views
- Very high specification
- Additional residents facilities
With this in mind the proposed residential accommodation in the tower
has the potential to create a new value benchmark for Southbank.
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