PRIME LONDON MARKET UPDATE

Transcription

1 PRIME LONDON MARKET UPDATE 5 July 2018 Tom Bill Head of London Residential Research Prime London performance, pricing and volumes, drill down into PCL Outlook and impact of external factors like Brexit

2 LONDON IN UK CONTEXT Source: Land Registry Year to April, UK prices up: low rates, low unemployment, lack of supply But lack of supply = affordability constraints, prices kept in check Explains London under-performance London values +60% pre crisis peak, Scotland +7%

3 LONDON PRICES Zoom into London, lower affordability pressures in east vs west London responding to affordability pressures but overall kept in check

4 THE LONDON UNDERSUPPLY ,390 39, ,870 21,040 23,580 26, k Net annual requirement / / / / / / New build Net conversions Net cha nge of Use De m oli t io ns Net additions Target 66K net additional dwellings, office to resi low hanging fruit picked, constraints will continue in some areas

5 LONDON TRANSACTIONS Not whole story. Market has had a lot to digest. Affordability led to politicisation post-gfc. Ec opportunities vs political risk. Brexit. Plus govt stability, wealth taxes.

6 PRIME CENTRAL LONDON Annual % price change Stamp Duty on 1m+ homes rises from 4% to 5% Extra 3% stamp duty for additional homes Stamp Duty for 2m+ homes 7% Stamp Duty reform: 12% above 1.5m Vote to leave the EU PCL at the centre but the first effected and potentially first out Signs of stabilisation as taxes absorbed 8% since peak, vs 24% and 21%, not above 10% in 5 years, market stabilising

7 PRIME CENTRAL LONDON Annual % price change by price band Drill down, 5m- 10m first in/first out? Market is in recovery mode but nuanced and not uniform

8 PRIME CENTRAL LONDON Markets up vs markets down Also depends on location. Chelsea, biggest fall since peak in PCL, high-value but also more needs-based, highest transaction levels in Dec 17 since mid 2014 Marylebone and Mayfair renaissance at same time, cushioning effect Notting Hill Q118 on radar of needs-driven buyers Depends on price and area

9 PRIME CENTRAL LONDON Annualised % change in sales volumes Transaction levels +3.5% in year to April Same bottoming out but pattern Affordability, tax changes and UK politics all having an impact but not a black and white picture

10 Read the headlines with care The London Real Estate Bubble is Back and it s Scary 5 February 2010 Take cover! The housing market is headed for a bloody and protracted crash 4 April 2012 London House Prices Slashed After Brexit Vote 1 July 2016 Labour plan to crash house prices 6 June 2017 Many factors, buying in now, keep perspective and do homework

11 Global Cities Comparison -1.1% LONDON 11% PARIS 11% BERLIN 9% SAN FRANCISCO 1% NEW YORK -3% DUBAI -10% ABU DHABI 16% GUANGZHOU 7% HONG KONG European recovery: Berlin, Paris, Madrid, economic sentiment driving interest Hong Kong, regulation, tax, stamp duty for foreign buyers China, buying restrictions, capital controls, second home and leverage rules eased Abu Dhabi, economic climate low oil price, employment growth still weak despite rising price Dubai, weaker on supply while demand is relatively ok San Francisco, tech economy, 50% of global $1bn start-ups New York, supply and local taxes Sydney, low interest rates, low prime supply line, new train lines 9% SYDNEY More x-border demand and barriers, more idiosyncratic global growth less regional

12 But safe havens are alive and well Number of square metres US$1million buys MONACO 15 HONG KONG 22 LONDON 27 NEW YORK 30 SINGAPORE 37 LOS ANGELES 40 PARIS 45 SYDNEY 49 SHANGHAI 50 BEIJING 63 ROME 66 TOKYO 70 AUCKLAND 72 BERLIN 74 MUMBAI 94 ISTANBUL 104 DUBAI 137 CAPE TOWN 148 SAO PAULO 172 NAIROBI 580

13 DEMAND DRIVERS: TRANSPORT 71% 59% 45% 45% 34% Good transport links Close to work/study Good amenities (gym etc) Good local shops Affordable Source: Knight Frank Tenant Survey

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15 Notting Hill W2 Mayfair The City Kensington Chelsea Barnes Clapham Map showing the spread of 5m+ sales across London over last 5 years, south and east

16 DEMAND DRIVERS: CURRENCY (22 June 2016 to 3 July 2018) PCL+CURRENCY Effective discount since Brexit US rate rises mean play likely to remain 22 Jan was the day to buy, $1.22, has risen since then, waiting is high-risk strategy

17 London: Banks v Tech Source: Experian More tech workers, London reinvention, no signs of banker exodus, euro clearing Post referendum deals, tech and banks and large CRE deals

18 Post-referendum property deals 20,000 sq ft 228,000 sq ft 51,500 sq ft 154,000 sq ft 500,000 sq ft 1.15bn 106,000 sq ft 469,000 sq ft 500 extra jobs at new HQ Tech companies take next step Financial sector still important Capital still targeting London and beyond

19 % Flat market followed by more momentum, based on 2 year transition deal

20 PRIME LONDON MARKET UPDATE 5 July 2018 Pricing and trading volumes have stabilised Affordability, policy and politics keep market in check Modest growth forecast but nuanced and not uniform London remains a place people want to live and work

21 Knight Frank LLP 2018 This presentation has been prepared for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this presentation. As a general presentation, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this presentation in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members names.