Luxury London Period Properties Outperform New Builds
11th September 2014 Paul Andrews
According to latest figures luxury London period properties deliver up to 78% capital appreciation since 2009 to outperform new-build apartments
Luxury homes in period buildings 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, analysis by specialist prime residential property investment advisor Huntly Hooper shows.
Re-sale prices for new-build apartments built in Central London’s prime residential neighbourhoods in the past decade climbed by 46.2% from 2009 to the end of the first quarter of 2014, data compiled by Huntly Hooper reveals. Flats across the rest of Prime Central London appreciated by 57.4% in the same period, the study found, with properties in some top-tier established period districts appreciating by as much as 78%.
Oliver Hooper, founder and managing director of Huntly Hooper, said: “Buyers should consider their investment options more widely before signing on the dotted line for the latest new-build apartment in Prime Central London. Period properties in the city’s established markets have outperformed the average of their new-build peers over the past five years.”
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, Huntly Hooper’s research shows. More than two-thirds of the housing stock in these eight “period neighbourhoods” was built before 1900.
Successful sales campaigns by developers, notably targeting wealthy Asian buyers, have fuelled 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 a square foot, or 9% more than the average price fetched by flats across the rest of Prime Central London, the report shows.
“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,” Oliver Hooper said.
While the appreciation in values is more muted for new apartments, they generate a better average gross rental income return and are quicker to lease than flats in older buildings in Prime Central London districts. The 2.6% gross yield outstripped the 2.1% return for flats in established period neighbourhoods.
Investors should be aware, however, that the superior rental return might be eroded by the higher service charges that typically come with new developments. "The new-build income return is also insufficient to close the gap with the superior total returns - from combining income with capital appreciation - that an investor would have obtained in the past five years from a period neighbourhood flat", Hooper said.
Oliver Hooper concluded: “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.”