Buyers of luxury new-build homes are spoilt for choice in London. And high-quality homes with character are still in demand, despite a downturn in overall prime property prices.
“We are seeing fragmentation in pricing,” says Ian Marris, the joint head of residential developmental at Knight Frank. “The different geographies are performing at very different levels, and the underlying reason lies in value for money. Buyers [of new-builds] are making a qualitative assessment that the property they are buying represents a sensible purchase,” he says. “They are demanding that the quality of new-build properties and the attention to detail matches the price point. Even though the volume of buyers is down, the buyers who are there are willing to pay for quality. We liken the new-build property market to the car market. There are many products with subtle variations, and some are able to command higher prices.”
Developments that are perceived to be poorly designed, with inflated prices are the ones that developers are struggling to sell. “The danger is in being too generic,” Marris says.
A three-bedroom apartment at Observatory Gardens in Kensington, west London, sold last month for £2.89 million, a record price for the development at more than £2,500 a square foot. The Collection, the acquisition company that bought the property, and One Point Six, the developer, sold it for £1 million more than they paid in the post-Brexit referendum summer of 2016.
“There has been discounting happening to get new developments sold, particularly when it comes closer to completion,” says Katy Warrick, a research analyst at Savills. “Yet what has been most popular is anything with character and heritage.”
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Warrick cites the properties at the redeveloped Television Centre in White City, west London — formerly home to the BBC — as particularly desirable. The grade II listed buildings are being turned into 950 homes by Stanhope, a developer, in partnership with Mitsui Fudosan, the Japanese property group, and Alberta Investment Management. Prices start at £750,000.
“[The development] is popular in the domestic market as well as overseas because people feel they are buying a piece of London legacy,” Warrick says.
Other developments that have been successful, even in the tough market, include Southbank Place, where 877 homes are being built. It also includes Shell Centre Tower, home to Shell, oil company. “Having an iconic building is something else that will differentiate a property, because there is a lot of supply in the premium new-build market,” Warrick says. “Properties have to feel as if they offer you a lifestyle.”
Marris says Chiltern Place, a luxury development in Marylebone Village, central London, is one that has sold well over the past two years. The 15-floor development, by Ronson Capital Partners, is comprised of 55 one to four-bedroom apartments and duplexes, plus one townhouse, and prices start at £2 million. Its features include high ceilings and views across the area.
In this price-sensitive environment, developers are finding it harder to sell large properties in already expensive areas. Marris gives the example of a 500 sq ft one-bedroom flat in Shoreditch, east London, which would be easy to sell based on the prices in the area. However, a one-bedroom flat of 600 sq ft in the same location would command a premium, and make it much harder to sell.
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Some commentators have suggested that London has too great a supply of luxury new-build properties. Yet Warrick says that the latest data shows that sales of new-builds in prime locations have increased over the past two years, while the second-hand market has struggled. “It is only recently that price levels have fallen off,” she says. Marris believes that luxury new-builds are at the peak of supply in London, and that in the next two to three years a shortage will emerge because of the lower number of new starts and the slower pace of completions. “We have definitely seen a dramatic cut-off [in new starts],” he says. “The smart money now would take a view on the market in the next two to three years, as supply then will be limited.”
Areas that have remained strong throughout the downturn include Mayfair, which is “still perceived as the luxury heart of London”, Marris says. Chelsea, meanwhile, has been quite hard hit, as has Knightsbridge, though to a lesser extent. Marris says that prices ran too far ahead of buyers’ expectations and that property values are recalibrating.
