Due to recent uncertainty in the UK, from political to financial, London’s property market has seen tough times over the last few years. With price falls being seen across the capital, both the rental and the buying markets have been drastically hit. The luxury sector is now starting to feel the pressure of the city’s unstable future. As more buyers move out of London and investors turn their interest elsewhere, luxury property is witnessing a dramatic fall in their prices.
The fall in figures
A survey by Lendy, one of Europe’s largest peer-to-peer secured lending platforms, show that only 369 houses sold for £5 million or more in the UK last year, down 15% on 433 sold in 2016 and down a third on 545 in 2014. The report also notes that these super-prime property sales were worth £3 billion last year, falling from £3.7 billion in 2016 and £4.7 billion in 2014.
What’s to blame?
In the report, Lendy explains that key drivers of the fall in luxury home sales are likely to be because of several factors. These include the slowdown in purchases by overseas high net worth individuals since the Brexit vote, and banks becoming more cautious in lending, even to the wealthiest individuals.
Since the Brexit vote, non-UK high net worth individuals have started to turn more cautious on super-prime residential property. Some are choosing to put investment plans on hold until the Brexit process is complete, or instead purchase larger portfolios of lower-value property. This is causing a more disinterest in luxury property.
Lendy adds that banks have also become more cautious on their lending to high net worth individuals, with even private banks instituting more stringent lending criteria and reducing LTVs. This has made it more difficult to obtain the multi-million-pound mortgages needed for super-prime purchases.
London’s luxury property
These drops are having an effect on London property. One the one hand, the areas with the highest number of luxury property sales are still in London boroughs. Kensington & Chelsea and Westminster remain the most popular locations for super-prime residential purchases, with 118 and 111 sales respectively. 62% of all £5m+ purchases in 2017 were located in just these two boroughs.
These areas were followed by the London boroughs of Camden – with 44 sales – and Barnet, home to The Bishops Avenue, known as London’s Millionaire’s Row – recording 14 sales.
While it is true that London is still seeing sales of luxury property, the number per year has seen a dramatic fall in the area. According to Lendy, these figures are well below the average of previous years.
Liam Brooke, Co-Founder of Lendy comments in the report: “Super-prime residential properties have definitely seen a slowdown in just the past 12 months, with overseas investors keen to see what Brexit will look like, and what effect it will have on the market.
“Private banks have also tightened up their lending criteria for high net worth investors. A £5 million mortgage isn’t as easy to come by as it once was, even for investors with very substantial wealth.”
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.