Luxury residential prices in Prime Central London (PCL) may begin to recover in 2022 after a tumultuous period since the onset of the Covid-19 pandemic.
A recent real estate study predicts that prime property prices in PCL will increase by 21.6% over a five-year period from 2021 to 2025.
The most pronounced growth would happen in 2022 with a 7% increase. The market outlook also bodes well for prices in outer London’s prime residential areas.
Investors and landlords should also take note of an upward trend for prime rents in the capital. The study estimated a 14.2% increase in prices between 2021 and 2025.
Take note that the forecast growth in prices and rents only involves the secondary luxury property market.
Belgravia, where the new Peninsula Residences London is located, is recognized as one of the world’s most prestigious residential addresses, located next door to Buckingham Palace.
The Neighborhoods In PCL
Which neighborhoods define the PCL area? Foreign investors should remember the following communities:
- Belgravia
- Fitzrovia
- Holland Park
- Hyde Park
- Knightsbridge
- St John’s Wood
Other well-known communities in PCL include Kensington, Marylebone, Mayfair and Pimlico. Some industry professionals may argue that certain communities aren’t part of the PCL area.
Take St John’s Wood in Westminster as an example. The district’s location falls outside the generally known boundaries of PCL: Holland Park in the west, Marylebone in the north, Fitzrovia in the east and Pimlico in the south.
Despite being outside of the aforementioned borders, St John’s Wood has earned its right to be part of PCL for two reasons:
- Luxury homes with spacious gardens
- Proximity to schools
The location of St John’s Wood near schools is one factor for more North American investors in London. Luxury property buyers from Canada and the U.S. have surged nearly 100% between 2016 and 2019, according to the study.
More Americans also sought properties in Holland Park, Knightsbridge and St John’s Wood because of the U.S. dollar’s strength since Brexit.
Prime property prices in PCL would increase the most in 2022 and fall in 2024 before rebounding in 2025.
Forecast Growth In London’s Prime Property Prices
Prime property prices in PCL would increase the most in 2022 and fall in 2024 before rebounding in 2025.
Five-Year Forecast
- 3% in 2021
- 7% in 2022
- 4% in 2023
- 2% in 2024
- 4% in 2025
Outer London’s prime areas would also record the highest price growth in 2022. The study predicted prices to plateau at 3% in 2023 and 2% from 2024 to 2025.
A steady resumption of international travel allowed the ultra-rich to return and snap up PCL homes, causing higher prices.
In April 2021 alone, buyers spent roughly GBP 382 million (US $521.7 million) on properties worth over GBP 5 million (US $6.8 million) in London.
Current buy-to-let investors in prime London could expect a 4.5% increase in rents in 2022.
The Signs Of A Recovering Rental Market
Current buy-to-let investors in prime London could expect a 4.5% increase in rents in 2022. The study noted a 3% increase in 2023 and 2024 before falling to 2% in 2025.
The forecast highlighted the start of a recovering lettings market in March 2021. A gradual relaxation of health protocols and more people returning to offices have signaled a rebounding rental segment.
If you’re planning to invest in a buy-to-let luxury property, be aware of new industry regulations, from updated stamp duty to new electrical standards.
Prime rental properties in London cost between GBP 2,500 and GBP 5,000 every week before the Covid-19 crisis. Ultra-luxury rental properties command rates above GBP 5,000.
Some millionaires also preferred to rent luxury properties before the pandemic. Their choice might be one reason for fewer property transactions worth over GBP 5 million.
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.
London Market More Resilient Than New York City
While New York City (NYC) had more high-value property deals than London since 2010, the study described the U.K. capital as “more resilient.”
Luxury property transactions valued at more than GBP 5 million in London rose 12% in 2020 year over year. In NYC, property deals worth over US $5 million declined 37% during the same period.
The Savills Prime World Cities Index also noted a 7% decline in New York’s property transactions worth over US $5 million from 2016 to 2020.
The forecast holds an optimistic outlook on the recovery of London’s ultra-luxury property market. NYC’s super-prime property market may take longer to recover, aligning with other industry predictions for 2022.
