A “W1” postcode in central London has cachet unmatched by almost any location in the world, that’s according to high end London property agents, Kay & Co.
But they say, even here, prestige alone has not always been enough to tempt the many overseas buyers they deal with – particularly those from the Far East – to look beyond their preference for new-builds.
New-build property has been very attractive to overseas buyers and most will not consider anything else. The market for the new-builds in prime central London is constantly changing and refining and developers respond to this with ever slicker products, designed with the overseas investor in mind.
However, argues Kay & Co, they are missing out on opportunities from an investment point of view. Their analysis of sale prices has found that re-sold new-built property does not perform as well as the older, more established housing stock. British buyers, they say, know this: the archetypal British dream home is generally not a “flashy” apartment, but a period property, be it flat, cottage or townhouse.
New-builds attract premium prices which can have a significant impact on average values. For example, quote Kay & Co, “in W2, the Lancasters development overlooking Hyde Park considerably inflated the average new build values for the area in 2011 and 2012. According to EGi Research, the maximum new build per square foot asking price today is £4,357 for a three bedroom unit at the Chilterns in Marylebone, with the development average being £2,916. This compares to an average for all stock across the postcodes of £1,903.”
But that is only part of the picture say Kay & Co. “A more complete examination of performance shows that, despite the small number of new build properties that come back to the market within the first five years, their values do not keep pace with the wider market.”
Data from Land Registry, for newly built properties that sold first between 2008 and 2011 and have since been re-sold, average annual increases in price of 12.8%.
For second hand properties, if the top and bottom 10% are excluded (where either very short leases, or the benefits of refurbishment muddy the waters) the performance is striking, with an average 16.2% increase in values.
So, say Kay & Co, capital growth on second hand homes is 27% higher than on new-builds in the initial years of ownership, and “although new-builds are an easy and ‘clean’ investment, the shrewd investor could be rewarded for looking at London’s “W” areas through the eyes of the locals.”