Nervousness in London’s super prime & prime property markets

By Carlin Peton

London is the most desirable global city for the super wealthy, but with property prices reaching record-breaking levels and ongoing tax concerns, what does the future hold for the super-prime sector?

According to Oliver Barns super prime market view report 2016, the market has cooled down in the past year but has overall remained relatively stable. Last year records were broken when a penthouse at 77 Mayfair was sold for £7,000 per sq. ft, this research signifies that buyers will still pay high amounts for the right quality in the right location.

However ‘debt funding construction of the costliest homes has increased by about 75 basis points to 3.75 percentage points over benchmarks since January’, said Randeesh Sandhu, chief executive officer of residential development lender Urban Exposure Real Estate Plc. For large projects in central London, financing costs have risen the most since 2012 over the past six months, said William Newsom, a senior director at broker Savills Plc. A basis point is 0.01 of a percentage point. Sandhu adds “There has been nervousness for a while in the super prime market and there is also now nervousness in prime.”

Hansen Lu, a property economist at Capital Economics, said the outlook for prime central London housing is “lacklustre” and “prices in the most expensive parts of the capital will struggle to do more than mark time” during the year.

A number of analysts and economists have sounded a warning about another financial crisis lurking on the horizon. Stock markets across the world have tumbled amid a mass sell-off. The FTSE 100, for example, is down around 16% over the year and has entered a “bear market”. Both the Organisation for Economic Co-operation and Development (OECD) and International Monetary Fund (IMF) have highlighted a bloating pile of cheap Western debt in emerging markets as of particular concern, which may go bang when interest rates rise and trigger a wave of defaults.

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