Investor Appetite For UK Luxury Properties Worth GBP 10 Million May Continue In 2022

row of modern buildings along the waterfront in london, united kingdom
The demand for luxury properties worth GBP 10 million (US $13.4 million) in the U.K., particularly in prime central London, will continue in 2022.

The demand for luxury properties worth GBP 10 million (US $13.4 million) in the U.K., particularly in prime central London, will continue in 2022.

Savills Research predicts prices in the capital to increase 8% in the year ahead and almost 24% by 2026.

The price appreciation precedes a growing demand for prime real estate, especially larger houses.

More prominently, the burgeoning appetite among domestic and foreign buyers illustrated a recovery that’s been long overdue, according to Savills.

Luxury property prices in London have fallen since 2013, but there’s been renewed interest in luxury homes at prime addresses. The trend became evident in areas such as Holland Park and Notting Hill, signaling a rebound in market activity.

The Pace of London’s Price Appreciation

The busiest month in 2021 for London’s luxury property market happened in October. Savills noted July 2013 as the last time when transactions worth GBD 10 million or more reached peak levels.

There’s been pent-up interest among new luxury property buyers that once London lifted Covid-19 lockdowns, demand increased by 60% in October 2021.

Prime real estate deals worth £ 5 million (US $6.7 million) or more also registered record-high growth. In the first 10 months of 2021, there were almost 400 transactions in London alone.

The luxury property deals’ collective value cost over £ 4.1 billion (US $5.5 billion), the highest figure since 2014.

Over the next four years, median resale prices in prime central London would maintain balanced growth:

  • 4% in 2023
  • 2% in 2024
  • 4% in 2025
  • 4% in 2026

The upcoming U.K. general elections in 2024 could halt the growth momentum of property prices in London’s central area. Uncertainty over election results seems to be a primary factor.

Savills noted “underlying tax environment and the capital’s maturity as a world city” as other reasons for a temporary drop in prices before stabilizing again.

london skyline with views of landmarks and waterway

The new residences are among the most coveted prime properties in London.

The Reasons For Sluggish Demand Before Covid-19

Luxury property sales in the U.K. became fewer ever since a new stamp duty system took effect in December 2014.

The Brexit referendum also affected sales because of political uncertainty, although higher stamp duties seem to be a bigger cause.

For example, the old stamp duty system charged £ 147,000 for a £ 2.1 million (US $2.8 million) property.

You’ll pay £ 165,750 in stamp duty if you buy a similarly priced property now—an almost 8% increase.

Luxury property buyers can use an online calculator to determine the applicable Stamp Duty Land Tax. Despite Brexit and higher taxes, luxury property buyers in the U.K. have sought bigger houses amid Covid-19.

The Pandemic Put Things In Perspective For HNW Buyers

There’s been a dramatic lifestyle change among the HNW (high-net-worth) and UHNW (ultra-high-net-worth) in terms of how and where they want to live during a pandemic.

As remote work became common, many have turned their attention to suburban and regional markets in search of prime properties.

Savills cited an indefinite change in remote-work policies as a key driver for demand in properties across outer London.

Luxury property prices in suburban areas would increase 15.4% over a five-year period to 2026. Suburban areas refer to places within the London Orbital Motorway surrounding Greater London.

Inner-commute areas include locations within a 30-minute trip to Greater London. Prime real estate prices in this segment would surge by nearly 16% over a five-year period to 2026.

Prices in outer-commute areas—an hour away from Greater London—would be 17.1% higher over a five-year period to 2026.

row homes in a burrough of london, united kingdom, with balconies and covered porches

There’s been a dramatic lifestyle change among the HNW (high-net-worth) and UHNW (ultra-high-net-worth) in terms of how and where they want to live during a pandemic.

Conclusion

The relaxation of social-distancing rules and longer-term remote work fuel investors’ appetite for luxury properties in the U.K.

Prime real estate prices in Greater London’s outskirts would increase in the next few years. In other words, you should consider a luxury property purchase as early as now before a potential upswing in prices.

Author

Randolf Santos has covered different segments of the real estate industry since 2014. He worked at S&P Global Market Intelligence before joining Forbes Global Properties as a contributor. You can reach him at [email protected]

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