The rise of the £1m London house price tag

Posted On Thursday, 09 October 2014 14:42 Published by
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Pam Golding Properties markets new development in Wimbledon.

London South Bank Tower

Against the backdrop of an influx of wealth, rising population and ongoing shortfall in housing supply, prime London residential property has enjoyed several decades of sound growth in both capital values and rental yields. In fact, says Dr Andrew Golding, CE of the Pam Golding Property group, residential property prices across the Greater London market as a whole have increased by 23 percent over the past two years alone.

"Interestingly, in a recent report on the prime London residential market by Pam Golding Properties' associate, the UK-based Savills, the number of London house sales breaking the £1million price barrier is expected to rise by 47 per cent by 2018, in further expansion of a market that has grown by 165 per cent in the past five years."

The report states in 2003, just 1 825 £1million-plus sales were recorded by the Land Registry, a figure that rose to 7 529 last year. Presenting a '2018 £1million map' of the capital, the report says by 2018 the annual total is expected to exceed 11 000, in response to forecast price rises and the priming of more Greater London locations.

According to Savills' calculations, annual turnover in London's £1 million-plus market has risen by 312 per cent over the past decade and is forecast to record a 505 per cent increase in the 15 years from 2003 to 2018. During the same period, prime London house prices are expected to have risen by 160 per cent, evidence both of the rising prosperity in the capital and the geographical expansion of the prime market.

Ten years ago, just over half of sales worth £1 million or more were concentrated in just two central boroughs – Kensington and Chelsea, and Westminster - with 569 and 370 sales respectively. In 2013 while these two central boroughs still accounted for a third of this high value marketplace, four other boroughs - Wandsworth, Hammersmith and Fulham, Camden and Richmond upon Thames – each saw more than 500 £1million-plus sales recorded.

Only two of London's 33 boroughs - Barking and Dagenham, and Newham - did not see any £1million-plus sales recorded by the Land Registry in 2013. Three other boroughs recorded fewer than 10 such sales – Croydon (9), Waltham Forest (3) and Bexley (2) – but even in the highest value areas of these five boroughs average values were between £275 000 and £390 000. And in the past five years, £1 million sales have increasingly extended into areas such as Acton, Dalston, Herne Hill, Tooting Bec and Blackheath.

The report says in the next five years such sales are expected to become significantly more concentrated in emerging locations such as Streatham, Kingston, Borough and Northwood. The majority of locations where the emergence of £1 million-plus sales is anticipated in the next five years neighbour existing prime areas. Areas such as Earlsfield, Brixton and Wanstead should see a greater proliferation of the £1 million price tag, which is also expected to begin to appear in such locations as Crystal Palace to the south, Southgate to the north and Isleworth and Osterley to the west.

The new £1million London map also identifies the emergence of a third 'wealth corridor', running south east via Dulwich and Bromley, as wealth flows out from more central locations, boosting house prices along its route. Much of the growth in £1million-plus sales will be organic, driven by underlying price growth," says Lucian Cook, head of UK residential research at Savills. "However, a larger five-year new build supply pipeline will open up new areas of prime, meaning that new build will play an increased role in the £1 million-plus market."

In 2003, a prime London property worth £1million at the end of 2013 was worth just £472 000 and is forecast to reach £1.23 million by the end of 2018. Calculations are based on the Savills five year prime London forecast which anticipates growth of 23 per cent to the end of 2018, assuming no further increases in the taxation of high value properties.

Adds Dr Golding: "An area with a proven history of strong rental demand and capital growth, and increasingly favoured by local families and the career-minded seeking quality accommodation in order to live and work in London is South West London. This includes the sought after, affluent suburb of Wimbledon, which is just 11.3km south west of the centre of London, and is traditionally popular among South African investors."

South of Wandsworth and east of Kingston upon Thames, Wimbledon's residential property market consists of a mix of grand Victorian houses, modern housing and low rise apartments. Its proximity to London attracts commuters while its access to wide open spaces, an array of sports activities, theatres, restaurants, shops and pubs and other entertainment provides a laid-back way of life and escape from the city.

Chris Immelman, MD of Pam Golding Properties International & Projects Division, says Wimbledon offers a convenient location for South African buyers, many of whom have family overseas or require a London residence for part-time business or personal use, or are simply looking for a sound property investment.

"We are currently marketing a new development in Wimbledon comprising 31 apartments (27 one-bedroom and four two-bedroom), well situated close to shops, markets, greenbelts and transport links. The development involves the conversion of a commercial section in an existing residential block to modern residential apartments with upmarket finishes and furnishings and each with a parking space."

Prices of the 500 sq ft one-bedroom apartments range from £313 000 to £370 000 while the 900sq ft two-bedroom units range from £430 000 to £450 000. Adds Immelman: "With residential properties under 1000sq ft in size in prime London having risen in value by 22 percent since mid-2012, and those from 1000 to 2000sq ft having seen a two year price growth of 18 percent on average, from an investment perspective these brand new Wimbledon units are very appealing."

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