Lack of overseas buyers hits London’s prime property

Lack of overseas buyers hits London’s prime property

Sales and rental prices are down in the capital’s most exclusive postcodes – but activity is returning

By Liz Rowlinson

In July, Tel Aviv-based corporate lawyer Ami H Orkaby bought an apartment in London’s Mayfair. When he can fly to London he intends to use it himself, making the most of the expensive restaurants, the shopping and Annabel’s private members club on his doorstep.

“I am confident that Mayfair will bounce back after the pandemic, like it has done many times before in history,” he says. “I saw an opportunity to buy in the current market, with a weak pound and a softening of prices.”

These days, wealthy international buyers are conspicuous by their absence in parts of central London. Some streets remain eerily quiet and free from the supercars that regular visitors like to bring over for the summer.

The lack of buyers and renters from overseas has hit the local sales and lettings markets. While parts of the country underwent something of a “mini boom” when the housing market reopened after the Covid-19 shutdown — the UK’s average property price surged in August to record levels, according to Nationwide — demand for London’s prime homes has been slower to bounce back.

With so much interest in suburban and rural living recently, we took a look at the property market in the capital’s most exclusive neighbourhoods, to see how its luxury real estate is being affected by the pandemic.

How many homes are selling?

In July and August, the number of homes sold (exchanged) across London’s prime areas across all price brackets was down by 24 per cent compared with the same period in 2019, according to data from LonRes, a research company.

However, for the capital’s most luxurious homes, those priced above £5m — where sales tend to be less reliant on credit — transactions in July and August were actually significantly higher than they were last year: up 31 per cent on the same period in 2019.

Marcus Dixon, head of research at LonRes, says he thinks the prime London market has been resilient. “Transaction volumes are recovering,” he says. While sales are still down, the number of properties going “under offer” in August was 8 per cent higher than in the same month last year.

Guy Gittins, managing director of Chestertons, which specialises in selling homes in prime central London, says his agency had the busiest July in four years. That month, they dealt with 1,150 offers and agreed the sale of 272 properties, compared with 780 offers and 181 agreed sales in July 2019.

Time to bargain?

One of Chestertons’ sales agreed in July was a three-bedroom apartment in Mayfair that went for £4.65m. The Hong Kong-based purchaser, who had viewed the apartment a year earlier when the asking price was £5.95m, now thought it looked good value.

The property was initially put on the market back in May 2018 for £6.5m — meaning the final sale price was 28 per cent lower than the seller had originally hoped for.

But such price drops are not the norm, Dixon says. Across prime property in central London, the average discount achieved in August was 7.6 per cent lower than the initial asking price — smaller than it was in August 2019, when the average discount was 8.9 per cent. In fact, achieved prices in August were up 2.8 per cent on where they were a year ago, according to LonRes.

Savills, though, expects prime house prices to fall 2 per cent this year, and predicts slower price growth than after previous downturns due to the pandemic’s impact on the global economy and wealth generation.

“The pace of the recovery will be dictated by the lifting of travel restrictions,” says Lucian Cook, Savills’ residential research director, who is confident London’s appeal to overseas buyers will endure.

The lack of overseas buyers

In the 11 weeks to mid-August, the number of new buyers registering with Savills who were looking for £1m-plus homes in the south of England, excluding London and the commuter belt, was up 120 per cent on the pre-pandemic average.

In central London, where international buyers have been unable to view homes because of travel restrictions, prime registrations were down nearly 20 per cent.

This has meant UK-based buyers have faced less competition, agents say. Peter Wetherell, chief executive of Wetherell estate agency, points to the sale of a property at 47 Grosvenor Square for £18.6m, which went to a UK-based family in August within 24 hours of it going on the market.

At the end of July, Wetherell sold a four-bedroom home at 76 Park Street, also to a UK-based buyer, for £4.85m. It had a guide price of £5.5m.

As in Mayfair, the lack of international buyers in the Knightsbridge and Regent’s Park areas is a growing concern. “They still want to buy in London but can’t get here,” says Paul Finch of Beauchamp Estates. Other world cities face the same problem, he adds: “Which other cities might [investors] choose? The grass is not greener in the markets of New York, or Hong Kong.”

It’s clear that the buzz and many of the things that make London great are just not there right now Camilla Dell, Black Brick. In Hong Kong, which had experienced widespread civil unrest and pro- democracy protests before the arrival of Covid-19, sales of properties priced above HKD $20m ($2.56m) dropped by 17 per cent in the first half of 2020, compared with a year earlier — reaching their lowest level since 2016, according to JLL, the global property company.

In Manhattan, the number of sales in the second quarter of 2020 was down 54 per cent compared with the same period last year, the largest decline in at least 30 years, according to estate agency Douglas Elliman. The median sales price fell 18 per cent, compared with the same period last year, to $1m, the biggest drop in a decade.

Estate agents in the UK capital argue that upheaval elsewhere in the world could benefit London’s prime market. Many cite the possible demand from the 200,000 Hong Kong citizens who, according to Foreign Office estimates, could move to Great Britain in the next five years.

A steep drop in rents

Travel restrictions have also had a big impact on the rental market, which has been hit by a sharp drop in demand and significant increase in supply. Since June, the number of new lets every month has been 25 per cent lower than in the same month in 2019, according to LonRes. Meanwhile, there are now 60 per cent more properties on the rental market than a year ago.

The lack of tourists has forced Airbnb landlords to list their homes on the long-term rental market. Since May, about 12 per cent of all the new homes available to rent in London’s Zone 1 were previously let on a short- term basis, according to Hamptons, which calculates that the average rent in inner London in July was 8.4 per cent lower than in July 2019.

“After six months of receiving no rental income, the high service charges and mortgage payments are beginning to bite so landlords are staring down the barrel,” says Cory Askew, director of central London sales at Chestertons. “Some are selling up, others are dropping their prices.”

“It’s a great time for tenants to negotiate 20 per cent off their rent,” says Gittins.

Changing tastes

In recent weeks, the popularity of London’s prime “villages” — smart, green areas such as Richmond and Hampstead — has surpassed the capital’s traditional golden postcodes in Belgravia, Knightsbridge and Kensington, says Camilla Dell of Black Brick, a buying agent.

In anticipation of future lockdowns, buyers are looking for access to parks (for all those quarantine dog purchases) and good high streets.

“Buyers might only move 2km in search of a better environment, and more space, for the same budget,” she says. Now, they might opt for a house in St John’s Wood in north London, rather than a flat in Marylebone in central London; or a four-bedroom house in west London’s Fulham with a garden, in preference to a two-bedroom flat in South Kensington.

House and Home unlocked 

In Chelsea, the market for homes below £2m has been the strongest, driven by purely UK-based buyers, says Percy Lendrum of estate agents Dexters. “A two-bedroom flat in Lennox Gardens sold within 48 hours for well over the asking price of £1.25m after five offers.” Such properties overlooking communal gardens are much more likely to sell after Covid-19 than those without, he says.

But the future of prime central London all hinges on whether people will actually want to live and work there post-pandemic, or if the city endures another lockdown.

“When we do viewings there, it’s clear that the buzz and many of the things that make the city great are just not there right now,” says Dell. “But it’s too early to say whether the shine has gone off London as an investment.”

Will the pandemic bring high rise service charges back to earth?

By Antonia Cundy and Hugo Cox

After one of his lectures at the Bartlett School of Planning in London, Peter Rees was approached by a student who was surprised when the professor did not recognise him. “He said to me: ‘My parents bought six apartments in the block where you live, but I’ve moved somewhere better now,’ so that put me in my place.” The City of London’s former chief planning officer did not mind the snub to where he lives — a 1,000 sq ft flat on the 27th floor of The Heron. But the anecdote is a telling example of how quickly once sought-after high-rises can be upstaged by new super-luxury developments. “Developers started thinking: ‘OK, how can we raise the bar?” says Chris Graham, a marketing specialist in luxury homes. “As opposed to just the standard things — the swimming pool, the wellness spas — they’ve started adding golf simulators, private cinemas, wine tastings, private entertaining spaces, a hobby room, and so on.”

As the supply of super-luxury homes has increased in recent years, developers have been locked into a race to outdo one another to attract buyers. But with costs escalating — and Covid-19 putting a damper on shared facilities — will residents still want to pay for them? For the upkeep of the building and its gym, pool, private cinema, and members’ club, as well as the 24-hour concierge team, Rees pays an annual service charge of £10 per sq ft. This is cheap compared with London’s priciest spots. At the Four Seasons Residences on 20 Grosvenor Square, residents pay £14 per sq ft for perks including a supervised children’s playroom, library, pool, a wine storage and tasting room and a network of car lifts to deliver residents’ vehicles to the deep-basement parking.

A decade after it was built, the service charge on a £30m, three-bedroom apartment in One Hyde Park, Knightsbridge, is £22 per sq ft — or £55,000 per year. Managed by the adjacent Mandarin Oriental hotel, it has underground parking, wine cellars, an “ozone” swimming pool (which uses O3 as a disinfectant), a squash court and golf simulator. Buyers have been “astounded” at the asking prices of these new luxury flats, says Roarie Scarisbrick, a partner at buying agent Property Vision. As for their service charges, he estimates that the going rate for London’s best spots is now £15-£20 per sq ft. Manhattan’s top-priced buildings command similar fees. At 432 Park Avenue, a 426-metre skyscraper overlooking Central Park, the amenities include a golf simulator, a private restaurant, multiple cinemas, a billiards room and a library — and, when the building was first finished, cost residents an annual $27 per sq ft in service charges. At 35 Hudson Yards, where the first homes went on sale in March 2019, the charge is $35 per sq ft per year — which may be Manhattan’s priciest, according to data from GS Data Services in New York.

Mounting maintenance costs

The rise in decadent amenities is not the only force driving service charges. Glass facades — common among today’s high-rise luxury towers — can make for high-energy costs and maintenance bills. The glass “skins” typically comprise a series of double-glazed floor-to-ceiling windows with strengthening laminates that can form the complete exterior. Rees estimates that these must be replaced every 40 to 60 years, at huge cost and major disruption, since residents must be temporarily rehoused. “Effectively you’re taking the walls away,” he says. “You’d need to rehouse the residents for 12 months at least. How do you compensate them?”

“While buyers of office buildings factor the costs of such re-cladding work when they come to price a building, residential buyers typically do not,” says Simon Sturgis, founder of Targeting Zero, a sustainability consultancy in London. Rees reckons the high costs associated with this work mean many of the new high-rise glass-fronted apartments may have a shorter life than the leases of the apartments they contain.  “From the leaseholder’s perspective they may have a depreciating asset, not in the short term, but in the future,” he says. “We’re talking about this conflict of 125-year leases in buildings where major parts of it only have a life of 65 years.” If the management companies responsible for running the buildings find themselves underfunded for such work, the result could mean large and sudden hikes in service charges when work is needed, he adds.

The cost of Covid-19

The arrival of coronavirus has further complicated matters as developers try to create buildings that are virus-safe.

“More elevator cores, wider corridors and doorways will help alleviate congestion but will increase cost and reduce usable residential space,” says Riyan Itani of Savills’ International Development Consultancy in London. “Developers will also need to consider how they can manage the density of usage through safety checks and implementing air filtration systems indoors.” Social distancing is curtailing the use of communal facilities. Regulating the number of swimmers in the pool is one of many new tasks of the top-end concierge manager; Itani reckons temperature checks could soon be added.

As Covid reduces the appeal of luxury apartments with shared facilities, developers in Hong Kong are increasingly experimenting with pay-as-you-go for core amenities such as gyms and pools, says Aradhana Khemaney of Savills’ Hong Kong office. “Not all residents want to use all of the facilities on offer,” she says. “Especially at the moment.” According to Camilla Dell, founder of buying agency Black Brick, London buyers are deserting luxury high-rises for their own four walls. “In the pandemic some weren’t even able to use those gyms and facilities but were still paying these charges,” she says. “In the world [post-Covid] the idea of sharing facilities really doesn’t appeal now.” 

Luxury living costs all under one roof But some fans of all-in luxury apartments disagree. In Singapore, owners of apartments at the Ritz-Carlton Residences in the Orchard Road district enjoy perks including tennis courts, two swimming pools, a library, three sky terraces — one featuring a manicured maze — as well as the usual fitness centre, coffee bar and hosting spaces. The price to residents is about $7.70 per sq ft a year. Plus, as freeholders rather than leaseholders, residents have control over how the building will be maintained.

Edward, who did not want to give his last name, a local who lives with his family in a top-end apartment block in Singapore’s Marina Bay, says that Covid-19 has done nothing to dent the appeal of his building’s facilities. “The day after government lifted social-distancing restrictions, the pool was full,” he says. Tot up all the additional expenses of living a life of luxury in your own house, meanwhile, and service fees may look like good value. “If they were living in a standalone home somewhere, they may require a house manager who might be on £55,000, a driver might be on £30,000, a childminder might be on £50,000,” says Gabriel York, co-chief executive of Lodha UK, the developer behind 1 Grosvenor Square, where the average home is between 3,500 and 4,000 sq feet, and the service charge is £15 per sq ft. For overseas clients with children at boarding school, a member of Grosvenor Square’s team will drop off and collect the child, for example. “In one of these developments their requirements for these household staff would be reduced,” he says.

Scarisbrick says that the convenience of lock up and leave will always ensure buyers will stump up hefty service charges. “The people who are buying these places simply don’t want to deal with the responsibility of their own house, they desperately want the security and convenience of these places.” For this group, the economics of fast-ageing glass and steel buildings may be less of a concern. Even Rees is sanguine. “At my age, having paid off my mortgage, if the thing depreciates it’s not the end of the world, to be honest.”

English property market rebounds on pent-up demand

Surge above pre-coronavirus levels likely to be shortlived as economic impact bites

A release of demand for property in England, suppressed by the lockdown, pushed the number of sales agreed in early June above pre-coronavirus levels.  Buyers returned to a market effectively shut from March 27 until May 12, data from the property portal Zoopla, estate agent Savills, and property data company TwentyCi show. The rebound in sales was quicker than most analysts expected. But the surge in transactions — which in some segments of the market have doubled in the past week — is likely to be temporary because much of the demand came from buyers who had been forced to pause moves. TwentyCi recorded 22,893 agreed sales in the first week of June, 6 per cent more than in the same period in 2019, and 54 per cent up on the last week of May.  According to Zoopla, sales agreed in the first week of June were 12.6 per cent higher than in the week leading up to the UK’s lockdown. “This is the first real sign that online viewing and new applicant levels is translating into market activity, though clearly to a degree it also reflects pent up levels in demand that was held back during lockdown,” said Lucian Cook, director of residential research at Savills.  Richard Donnell, research director at Zoopla, said: “This spike in demand will be shortlived as the economic impacts of Covid-19 start to feed through into market sentiment and levels of market activity in [the second half] of 2020.” 

However, added Mr Donnell, the increase in sales was partly also new buyers looking to trade up or move out of London. The recovery of sales in the English regions was far ahead of that in London, according to Zoopla, the hardest evidence yet that buyers were looking to move outside the capital. Wealthier buyers have driven the increase in activity. The 3,028 sales agreed on homes valued at £500,000 or more in the first week of June is 17 per cent more than the number agreed in the same week a year ago. Sales of homes valued under £200,000 — a much larger segment of the market — are down compared to 2019, according to TwentyCi.  “Undoubtedly there is some polarisation in the market,” said Mr Cook. “[Buyers were] those with a stronger financial cushion on which to rely and more affluent households less reliant on lending.” That matches patterns seen after previous economic crises, including the 2008 financial crisis, when affluent buyers returned first and took advantage of discounts.  The average reduction from asking price to agreed sale price is currently around 5 per cent on transactions recorded by Savills, compared to 2 per cent pre-lockdown. Agents reported that properties were selling at discounts of 5-10 per cent, or not selling at all.  Camilla Dell, founder of London-focused buying agency Black Brick, said: “There is quite a big gap at the moment between buyers, who feel the world is not what it was, and sellers, who think they’ll just hang on.”

Meet the estate agents turning themselves into superstar

A new breed blurs the line between the personal and professional 

By Emma Jacobs

Fredrik Eklund, a property entrepreneur and real-estate TV star, was at his local grocery store a few weeks ago. Wearing a face mask and protective gloves, he fired up “Blinding Lights” by The Weekend, then danced — while pushing his trolley past the fruit stand and gyrating in the jam aisle. The video was uploaded to his Instagram account, which has 1.2m followers. It attracted more than 1m views and 14,000 comments. “People want a fun broker,” says the 43-year-old co-founder of luxury real estate brokerage Eklund Gomes Team, who lives in Los Angeles and is author of a book called The Sell: the Secrets of Selling Anything to Anyone.  Many comments beneath his post were appreciative; others criticised him for endangering public health with his elbow bumps. “I remember my heart beating as I pushed the button,” says Eklund, who is also a star of Bravo’s reality-TV show Million Dollar Listing. “I thought, this will make or break me. I have had some criticism — people feel it is tone deaf. That is OK — you can’t please everyone.”  Dancing videos are a trademark flourish to Eklund’s larger-than-life public persona. A previous post was set in a $29.9m house with eight bathrooms. Despite his fear of alienating clients by being playful in a pandemic, he posted it anyway. “In the competitive landscape of real estate, it’s all about being relevant and top-of-mind — as long as you can back it up with real results and knowledge,” he says.

Such logic underlines the risks for property-market professionals in building “personal brands” through social media, and the pressures of trying to sell luxury property in uncertain economic times in markets saturated with high-end developments. That risk was highlighted in January when the London-based property agent Daniel Daggers — a glamorous figure who calls himself Mr Super Prime — resigned from estate agent Knight Frank after posting a picture of a high-end property to his Instagram account, where he has more than 30,000 followers. The Daggers episode raised wider questions about whether estate agents should build personal brands by turning themselves into celebrities and influencers. In doing so, they hope to attract attention to their businesses and the properties they sell. But do they risk their credibility in the process?  It is alleged that Daggers shared images of a house without the owner’s permission. Knight Frank says in a statement: “We are constantly vigilant around our social media guidance and regularly update our policy.” Daggers declined to comment. 

Daggers’ social-media feed is crammed with posts about high-end properties, including a central London penthouse on sale for £12m; a nine-bedroom home with five reception rooms in Knightsbridge for just under £10m and a Highgate property complete with staff accommodation and lift selling for a cool £12m. It also features selfies of Daggers attending a black-tie film premiere, holidaying in Israel and Ibiza, pictures of a sumptuous suite where he stayed with his girlfriend, sports cars in front of hotels — alongside his reflections on the property industry and his career. His attempts at profile building have also highlighted the cultural disparity between the US and UK property market personalities. In the US, which has a property mogul as president in the shape of Donald Trump, reality TV has created a new breed of superstar real estate brokers. As well as Eklund, there is Ryan Serhant in New York (who stars in Million Dollar Listing: New York) and the Altman Brothers in LA (Million Dollar Listing: LA).

Eklund concedes he had reservations before appearing on television. “It was a scary decision. Everyone told me not to do it. In real estate it was meant to be about the property not the agent.”  But the career move paid off. “Reality TV has boosted me.” It helped to make the market more transparent, he adds. “Social media and reality TV has given insight into the agents’ lives and allows the viewers to feel like they are in the home with the agent. In a competitive market everyone wants more eyeballs on the property.” Eklund has no divide between his private and public life. His Instagram account shows him with his picture-perfect children and husband, dancing with his kids to “Let It Go” from the film Frozen (with comments from the actor Rebel Wilson), enjoying a birthday breakfast in bed with his family and splashing in the sea.  Then, of course, there are the houses. Some he owns personally, such as the 5,144 sq ft Connecticut summer home with a pool and sauna that he hopes to rent out for $150,000 for the warmer months. But most of the properties he is selling on behalf of clients, such as the $9.7m house in 150 acres of land near Stockholm and the $29m mansion in Los Angeles.

A profile is good for business, he says. “You show all the colours of your personality. I’m not saying it’s raw. It’s thought out. I choose and think about what to share. If you follow the account, you hire me and you know what you get. That’s really good in sales.” Mauricio Umansky, celebrity founder and CEO of the Agency, a brokerage that sold the Playboy mansion in Los Angeles, has 400,000 followers on his Instagram account — though that is less than a fifth of his wife’s followers. She is Kyle Richards, star of the reality TV show The Real Housewives of Beverly Hills. 
 

On social media, he too mixes the personal with the professional, showing pictures of himself working out in a branded T-shirt in his home gym, skiing and hanging out with his wife in a luxurious tepee.  The properties are there, too: a restored 1926 Hollywood home with a castle-like exterior; a Beverly Hills house that featured in The Godfather, offered at $125m. Umansky says his agents are independent contractors and not bound by employee rules. However, “If they were to break a confidentiality agreement and put [a property on] social media, that would be grounds for letting someone go.”
 

Like Eklund, building a profile makes business sense, he says, citing the sale of a $35m estate to a celebrity who first saw it on Instagram. Jenna Drenten, assistant professor of marketing at Loyola University Chicago, researches social media and professions. Instagram, she says, stokes the property appetite, allowing everyone to see seductive behind-the-scenes images, many of which were once only accessible through physical tours, with agents as gatekeepers. The UK does not have a breed of superstar agents like in the US, despite Britons’ appetite for property television programmes such as Grand Designs. Andrew Perratt, head of country residential at Savills, says this is in part due to the nature of the industry.  The whole influencer thing is so big that brokers have seen it and applied it to their own world Melanie Everett “The UK doesn’t have a US-style brokerage system, in which independent contractors work together under a brand. In the US, [agents] are their own brand, so they have to promote themselves.” At Savills, a UK-based business that operates all over the world, individual agents are discouraged from building their own profiles. One London agent, who prefers not to be named, sees a cultural difference between the US market and UK. In the US, he says, there is no difference between private and business life. Instead, there is a preference for “perfectly conspicuous”. “If you sell self-deprecation in America it’s like selling soiled underwear.” Henry Pryor, an independent UK buying agent and commenter who is active on Twitter, believes this is an outmoded view of the UK industry. While agents do not have profiles like their US counterparts, developers have hardly been shy and retiring.  The Candy brothers, for example, are British property developers who were often photographed at celebrity events, with one marrying an actress-turned-pop star. Nicholas and Christian Candy, the developers behind the development One Hyde Park, opened in 2011 and once the most expensive residential development in the world, portrayed a flashy lifestyle that was key to marketing their high-end properties. “The property business is based on people rather than brands,” says Pryor. “People want individuals — they pay a premium in America to get them. It’s like getting celebrities to turn up at an event.” There are signs that social media is changing the property industry in the UK. Grant Bates, associate director at Hamptons International, is based in north London and has an Instagram following of more than 10,000. A sharp dresser, he posts his musings on the property market, video tours on interiors as well as details of Georgian town houses and Victorian villas. 
 

Bates says he is encouraged to create his own brand as well as his employer’s. While in the UK the employer’s brand is king, he says that social media allows employees to personalise it. “Much of our business comes via word of mouth or personal recommendation and social media can certainly help in this respect.” In north London, Bates says, 15 per cent of his sales last year were generated via Instagram. Chicago-based Melanie Everett, an independent agent who specialises in urban residential property, says her Instagram account is half private life, half property related. Her Instagram stories include buyers in their penthouse, a “chill dude” and his first condo, and a couple in their town house. Another is about her life, including Bible study, a manicure and a four-course restaurant dinner.

Everett detects a generational difference in attitudes to social media, too. “The whole influencer thing is so big that brokers have seen it and applied it to their own world.” Millennials, she says, see social media as an extension of working life. Younger buyers want to know about the local community and lifestyle, not just the property — that is easier to portray through social media than brochures and web postings. Eklund adds: “In the beginning people were so horrid at [social media]. Not everyone should do it. It’s a skillset. I have more followers than some big real- estate magazines have readers.” He is unconcerned that most of his followers are unlikely to buy one of his properties. “No one knows where the market’s going to come from,” he says. “It used to be that you knew all the buyers in the area and controlled the area. We don’t know where buyers are going to come from. You need more eyeballs.” In recent months the coronavirus pandemic has suspended luxury-property markets, many of which were struggling with oversupply, including in London and Manhattan. The virus hit just when New York’s luxury market appeared to be recovering after a slowdown brought on by a glut, as well as a disappearance of Chinese and Russian buyers due to geopolitical tensions. Developers and agents were also dealing with a rise in the city’s so-called mansion tax last year. 
  

The virus has also interrupted the normal business of client meetings and viewings — although in some states in the US, including California, the rules have been relaxed. Social media has been an effective way to reach housebound sellers and buyers in lockdown. Over the past few months in Chicago, Everett’s social-media strategy has been honesty. “I don’t want to send the message that business is booming and everything is great, because it’s not. Coronavirus has been a gut-punch to my industry. I’ve been open about my anxieties online, and will continue to do so.”  In one post she talks about her week being “filled with anxiety and fear”.

Another problem for agents, of course, is privacy. Drenten points out that social media increases visibility and “potential criminals can see what the layout of a house is and can determine if it is vacant, in just a few clicks. They can even virtually walk-through the home through virtual-tour technologies.” In the UK, says Camilla Dell, managing partner of Black Brick, an independent property agent, some high-end sellers do not want an online presence due to “confidentiality and security . . . The property might have artwork and family photographs. Private individuals don’t want that kind of exposure or need that kind of exposure.”  Then there are the rude posters, whom Umansky brushes off. “They can say, ‘I hate the rich’. We’ve had properties, with people saying, ‘I hate that house, I hate that style.’ “The more followers you get, the more negativity you get.”

Home sales slide in Battersea Nine Elms

‘Disjointed feel’ of the huge regeneration project blamed for putting off buyers

Less than 24 hours after the Conservative party victory in December’s general election, interest in south London’s prime property market was already picking up. “I had a businessman from the United Arab Emirates, who had been sitting on the fence for months, call me up and say: ‘Let’s move,’” says Marc von Grundherr, a director of estate agency Benham & Reeves. Later that day, they were finalising a deal worth £1.7m for a three-bedroom apartment in Battersea Power Station, the much-loved industrial building being converted into high-end homes on the south bank of the Thames. Developers in the wider Nine Elms area — the vast regeneration project surrounding the power station — will be hoping post-election optimism will ripple outwards. Parts of the area, which will eventually see the completion of 20,000 new homes, as well as landmark new office projects, still resemble a building site. And home sales have slipped recently.

In 2017, the year several of the residential projects were completed, 1,219 sales in Nine Elms were recorded on the Land Registry — though many would have taken place beforehand, while construction was still ongoing. In 2018, 479 homes were sold in the area; in the first nine months of last year, just 284 sales were recorded. Some investors bought homes in Nine Elms before they were completed, hoping to flip them for a profit on the resale market. Instead, an increasing number have had to slash prices. According to Zoopla, a few Nine Elms homes have had their prices cut by more than 25 per cent since being relisted for sale.

“We’ve had Middle Eastern conglomerates call us up and say: ‘Look, we bought 45 properties in a development that’s right next to the power station, right next to Chelsea: why aren’t they selling?’” says Mayow Short, head of Savills’ Battersea office. (Anyone who bought in Nine Elms thinking their new home was “right next to Chelsea” might be disappointed — Sloane Square is on the other side of the river.) “Plenty of [investors] were buying from hotel suites in far-flung parts of south-east Asia, without having scrutinised the plans, the layout or the market outlook,” says Roarie Scarisbrick, a buying agent at Property Vision.

Some might have thought they were getting something by the river but ended up in “an armpit of a corner” with a view of the railway and eight lanes of traffic, he adds. “A lot of people got caught up in a frenzy,” says Camilla Dell, a buying agent at Black Brick.

While the redevelopment of the power station has been carried through according to a well-worked master plan, says Scarisbrick, he thinks the rest of Nine Elms has a “disjointed feel” and that it is the result of multiple developers all pulling in different directions. Still, many think the long-term prospects for Nine Elms look much brighter. Aside from it being home to the new US embassy — which opened in Nine Elms in 2018 — a new Apple HQ is due to open there next year, as are two new Tube stops on an extension of the Northern Line.

Next to the US embassy, a new development by Ballymore called Embassy Gardens is gearing up for the launch of its “Sky Pool” this summer. The transparent, 25-metre pool will be suspended 35m off the ground between two blocks of flats. Ballymore declined to reveal the price of the project when contacted by the Financial Times.

Some Battersea residents think the Nine Elms site feels cut off from their neighbourhood. “I get the feeling that the people moving to the riverfront are almost turning their backs on the rest of Battersea,” says Jeanne Rathbone, who has lived in the area since 1962 and affectionately refers to the power station — which is one of the world’s largest brick buildings — as “the Taj Mahal of south London”.

New-builds nearly always carry a premium over existing stock, and homes in Nine Elms are no exception. The average sale price of an apartment there is 48 per cent higher than the average in Battersea, according to LonRes using Land Registry data.

In any case, families often opt for the Victorian terraces near Battersea Park. On Octavia Street, Savills is selling a five-bedroom house for £1.995m. A two-bedroom flat on Prince of Wales Drive is on sale for £750,000, though John D Wood & Co.

“People are quick to bash Nine Elms and that part of Battersea,” says Dell, “but that’s oversimplifying things.” In five or so years’ time, the clatter of power tools will hopefully no longer fill the air and the wind-tunnel streets around the US embassy will have been transformed into the thriving community spaces that developers have promised. Because of its potential, Battersea is an area “worth considering”, she says.

Why luxury brands want to sell you a home

By Judith Evans.

Wealthy people are being targeted with homes by Porsche, Armani and Bulgari – but are they buying?

Judith Evans explores the burgeoning international trend for branded luxury homes, for the Financial Times.

A 25-metre swimming pool stretches out before us, its immaculate tiles glinting in the soft, artificial light. Empty loungers with untouched, crisply folded towels are dotted around and the air is freshly scented, like an expensive beach club. But this is no beach: we are five floors beneath the rainy grey streets of London’s Knightsbridge. A few minutes earlier, a scarlet Rolls-Royce Phantom glided past the entrance.

The 2,000 sq m spa of the Bulgari Hotel and Residences London is an underground paradise — not only for guests on weekend jaunts to the UK capital, but also for the longer-term enjoyment of a very select few.

Simon Nixon, founder of MoneySuperMarket.com, is one. The comparison-site billionaire bought a Bulgari Residence attached to the hotel seven years ago for £39m, according to The Times (a figure his spokesperson does not dispute). Access to the spa — which includes a “vitality pool entirely covered by gold-leaf tiles” — is among the many benefits.

It is a different world entirely from that of the cash-conscious consumers whose appetite for cheap deals helped Nixon build his fortune. In buying his Bulgari Residence, he joined a growing band of ultra-wealthy homeowners. “Branded residences” — most of them linked to luxury hotels and serviced by them — now account for 65,000 homes around the world, according to the estate agents Savills.

Bulgari’s Hotel and Residences, Knightsbridge, London, where a select few — including Simon Nixon, founder of MoneySuperMarket.com — enjoy an opulent lifestyle

Bulgari’s Hotel and Residences, Knightsbridge, London, where a select few — including Simon Nixon, founder of MoneySuperMarket.com — enjoy an opulent lifestyle.

The Bulgari spa boasts a pool that is covered in gold-leaf tiles

The Bulgari spa boasts a pool that is covered in gold-leaf tiles © Roberto Bonardi.

They range from the discreet — a grand but quiet block under construction in Mayfair will be serviced by the Dorchester hotel — to the flashy. A Porsche-branded tower in Miami includes a patented “Dezervator” elevator to bring you and your car all the way up to your apartment, where you can gaze at it through a glass wall between your garage and living room.

Armani-branded residences in Dubai’s Burj Khalifa, the world’s tallest building, can be bought on the second-hand market for as little as £460,000. One vendor boasts in his online listing of his property that it “showcase[s] Armani’s understated, luxurious style. No Versace bling-bling nonsense here.”

Branded homes are springing up wherever rich people live: in the Swiss Alps, the resorts of Bali, the beaches of Barbados and the Cotswolds. Bulgari, the jeweller, has built apartments at almost all its global hotel locations. According to Savills, branded residences fetch a 35 per cent premium over similar, unbranded luxury homes globally.

In emerging markets, that figure can reach 70 per cent — despite the fact that service charges are high and some hotel services command an additional fee. “Upscale” branded developments — a step down from “ultra luxury” — are also on the rise, according to Savills.

“Buyers are getting more demanding, the world is getting smaller, and expectations of service levels are getting increasingly globalised,” says Fred Scarlett, sales and marketing director at Clivedale, a developer that builds homes with hotel brands. He adds that branded residences have been subject to both “consumer pull and market push”: “Everyone is trying to do something different from everyone else.”

Janis Joplin in the lobby of the Chelsea Hotel in 1969: the singer spent time there with resident Leonard Cohen

Janis Joplin in the lobby of the Chelsea Hotel in 1969: the singer spent time there with resident Leonard Cohen © David Gahr/Getty Images.

Janis Joplin to Margaret Thatcher

Living in hotels has a long history, from Leonard Cohen and Janis Joplin in New York’s Chelsea Hotel in the 1960s and 1970s to Margaret Thatcher, who lived out her last days in a suite in London’s five-star Ritz hotel in the early 2010s.

But today’s branded residences are different: a slick, corporate offering designed to reassure wandering and would-be billionaires that their pad in Kuala Lumpur is as convenient and secure as the one in Paris. It is a trend that reflects the internationalisation of the high-end property market, and the apartments are the ultimate in brand homogeneity.

Roarie Scarisbrick, buying agent at Property Vision, says: “When London became really international in the early 2000s, people would come — whether from Russia, India, the Middle East, the Far East — and they wanted to live in London with nice, comfortable apartments with air conditioning and security and parking. And we could not give it to them.

“We could offer them tall, thin houses with 100 stairs from top to bottom, or we could offer them a dusty old mansion block with a drunk porter in the daytime sitting at the door. Developers cottoned on . . . The most extreme landmark case was One Hyde Park. Everyone was sceptical about it at the time, but the values have gone up.”

The landmark London residence One Hyde Park: the Candy brothers' project broke house-price records and made headlines with its lavishness

The landmark London residence One Hyde Park: the Candy brothers’ project broke house-price records and made headlines with its lavishness © Alamy.

The Candy brothers’ One Hyde Park in Knightsbridge, serviced by the adjacent Mandarin Oriental hotel and completed in 2009, broke house-price records and made headlines with its shameless opulence. Now a fresh crop of branded homes is entering the London market.

The company behind Hong Kong’s Peninsula hotel is building at least 26 apartments along with a new hotel at Hyde Park Corner, to open next year. Ken Griffin, the US hedge-fund billionaire, has already agreed to buy one for about £100m.

Four Seasons opened a development on Grosvenor Square in 2019. Clivedale is currently building two separate sets of branded residences: 24 homes serviced by the Dorchester hotel on the site of the old Playboy Club next to Hyde Park, and another 80 on Hanover Square with Mandarin Oriental, where prices range from about £2m for a studio apartment to about £25m for a penthouse.

These developments will open their doors to a sluggish market. Many were conceived at the height of the property boom, but for the past four years London’s high-end market has declined; property prices in other major cities, such as New York, are also falling. The enthusiasm for luxury developments has left the prime end oversupplied, even as global cities struggle with shortages of affordable housing.

By the third quarter of 2019, more than 3,100 newly built homes had been completed but not sold in the UK capital, according to the data firm Molior London. This surfeit of choice will test branded developments’ appeal. “Some will sell off-plan, but it will take the experience of walking in there, seeing all the staff bowing and scurrying and smelling the million bloody scented candles [to sell the rest],” says Scarisbrick.

Some developers have quietly changed tack. Reignwood, another developer, had planned to sell 41 residences with prices starting at £5m in the restored Beaux Arts-era building that formerly housed the Port of London Authority close to the Tower of London, and which are serviced by the Four Seasons Hotel in the same building.

But the apartments at 10 Trinity Square have now become part of the hotel’s rental stock, available for short periods or for as long as a year.

Estate agents have suggested the building’s location in the east of the city, away from the glitzier west, was a problem. Four Seasons says: “We recognised a need in the market to serve a different type of hotel guest, those seeking a longer-term stay that would help them feel like a local, but with both the comforts of home and Four Seasons amenities and services.”

Residents can access the hotel’s lavish, wood-panelled, 16-room members’ club, complete with Château Latour Discovery Room and cigar lounge.

Agents had originally publicised six residences for sale at Bulgari’s Knightsbridge location, but just two were constructed, of which only one — Nixon’s home — has an owner listed with the Land Registry. Bulgari declined to comment on the change of plans or ownership. Others are selling well despite the turbulent market: Clivedale says its Dorchester and Mandarin Oriental developments are each two-thirds sold.

Even buying agents, whose trade involves arguing down prime prices on behalf of wealthy clients, say these homes fetch high prices. “[Branded residences] go hand in hand with new-build, which even if it is not branded, fetches a premium anyway. It’s a premium on top of a premium,” says Camilla Dell, founder of the buying agency Black Brick.

Scarisbrick says: “These developments are not showing any signs of this 20 to 25 per cent [prime price] correction that we’ve all been talking about.”

Owners are paying in part for convenience. Spa and gym access are standard, along with hotel security and maintenance, maids, room service and concierge services such as flight booking. Rather than go to the bother of hiring household staff, residents can use those of the hotel, while leaving their possessions in their own home.

Some also offer the option of letting your home through the hotel when you are not using it. Buyers “want something absurdly convenient and comfortable”, says Scarisbrick.

The Aston Martin residences in Miami will be completed in 2022. Whoever buys the $50m Triplex Penthouse wil have access to the last remaining Aston Martin Vulcan

The Aston Martin residences in Miami will be completed in 2022. Whoever buys the $50m Triplex Penthouse wil have access to the last remaining Aston Martin Vulcan.

Technology has made parts of this offering less unusual, however, even as the latest crop of branded residences were being built. Room service in the small hours was once a rare perk; now, notes the Mayfair estate agent Charles McDowell, apps such as Deliveroo and Just Eat have made it a service available to everyone. “The delivery thing has slightly had the wind taken out of its sails,” he says.

But branded residences also sell something less quantifiable. Purchasers of a Four Seasons, Marriott or Mandarin Oriental home are buying into the brand itself: both its nebulous essence and the specific value of a global company with a reputation to uphold. Hence the entry into the market of non-hotel brands, such as luxury goods and automotive marques.

Among the next raft of brands planning to enter the market is Condé Nast, owner of Vogue, GQ, The New Yorker and Vanity Fair, which already runs the GQ Bar in Berlin, the Tatler Club in Moscow and Vogue cafés in four major cities.

The company would not talk to the FT about its specific plans for its residences, but says: “We now view this evolving and expanding branded residential marketplace as a natural next step for our global lifestyle media brands.”

There is also a question of longevity. Brands may hold power now, but the decline of Cadillac, for example, shows the vulnerability even of a marque that once dominated the US luxury car market. Property buyers must be confident that the brand they are buying into has staying power.

Scarlett, of Clivedale, says the developer’s contracts with hotels last for between 30 and 50 years and it works hard to learn the “corporate dialect” of each one. But Paul Tostevin, director of world research at Savills, says he has seen housing developments “change flags” when brands fade.

At the Bulgari Hotel and Residences in Knightsbridge, a huge portrait of Monica Vitti, the Italian actress, hangs on the wall, while a specially made film is screened in the private cinema with clips from movies from La Dolce Vita to Mission: Impossible II that feature Bulgari gems.

The company says the building is intended to evoke the “fun and the colour” of the jewellery brand, along with the “Italian love of life”. For all that, there is a lot of polished mahogany and black leather.

The Bulgari building at least has a distinctive style. Others blend into one: greyish-beige furniture, gold accessories, a lot of leather and marble, inset flatscreens (the Candys’ bid for uniqueness was a golf simulator).

This is perhaps part of the point, as the travelling wealthy seek a sense of safety, an atmosphere they can rely on. But within this growing niche of the housing sector there is intense competition.

“I don’t know how intricate they can make their marble finishing and how deep they can make their silky shag pile carpets. Every development has a slightly longer pool than the last one, everyone has to outdo the last one,” says Scarisbrick. “I simply don’t know where it all ends.”

Prime property predictions 2020: Europe, the Middle East and Africa

There is light at the end of the Brexit tunnel in the UK and investment openings in the Gulf and Africa

Berlin is one of the top-tier eurozone cities that has seen strong price growth

By FT Residential

In the first of our series of property predictions for 2020, industry experts give their views on what to expect from residential markets in Europe, the Middle East and Africa over the next 12 months.

Liam Bailey, global head of research, Knight Frank

Our prediction in 2018 that the top-tier eurozone cities would outperform in 2019 has come to pass. Berlin, Madrid and Paris continue to sit high in the Knight Frank Prime Global Cities Index. Relative economic stability, low interest rates, limited new supply, and strong tenant and second-home demand are underpinning price growth.

What failed to materialise was the rising cost of finance we predicted. Instead, a slowing global economy has led to looser monetary policy: economic stimulus measures remain or have even been enhanced, with the European Central Bank restarting quantitative easing on November 1. This has eased affordability pressures in the mainstream market and at the prime end.

We expect the low-rate environment to persist in 2020 but, despite this, for luxury price growth to remain muted as the headwinds mount. From the interminably tedious Brexit negotiations to the US-China trade tensions, Hong Kong protests and US presidential election, the level of uncertainty has ramped up a gear in the past year.

Although European policymakers are likely to steer clear of major interventions as seen in other parts of the world, including foreign buyer taxes and bans, we expect greater regulation of the holiday home rental market in those cities that attract a high volume of tourists.

Camilla Dell, managing partner, Black Brick Property Solutions

The decisive Conservative victory in December’s UK general election will resolve much of the immediate Brexit uncertainty and restore confidence, especially regarding property taxation.

We predict the Conservative win will result in UK sellers hardening their positions, causing prices to rise this year — there is significant pent-up demand. In the final quarter of 2019, we registered twice as many applicants compared with the same period in 2018. The average budget per applicant also rose, from £4m to £6.35m.

While the Conservatives have pledged to bring in a 3 per cent stamp duty increase for overseas buyers, we predict this will be absorbed by the market, as previous rises have been. Most overseas buyers are far more concerned about an annual property tax, which is not part of the Conservative manifesto. We are also likely to see a rush of deals exchanging ahead of any stamp duty change.

Although the Brexit process has tarnished the UK’s reputation for sound governance, this should be put in context. As we found throughout 2019, London remains a (comparative) beacon of stability and rule of law, compared with much of the Middle East and Africa and, latterly, places such as Hong Kong. Despite tax rises in recent years, analysis by Savills found London is ranked 12th out of 17 global cities in terms of overall costs of buying, owning and selling prime property.

Hugo Thistlethwayte, head of global residential operations, Savills

In the United Arab Emirates, a combination of new government policies and major investment is set to change residential markets. In Dubai, the government has set up a real estate committee to address concerns such as oversupply, and 2020 will see developers focus on completion and handover of ongoing projects.

A Dh50bn ($13.6bn) fund in Abu Dhabi will boost the development of small and medium-sized businesses, research and development, and eco-tourism alongside a significant infrastructure spend. This should cascade into the local economy, although there may be a short lag for this to trickle into real estate capital values.

Freehold legislation changes announced in 2019 have helped create an investment-friendly legal framework and, as prices begin to bottom out, will herald a more stable, less cyclical and therefore more sophisticated market.

A growing population in Sharjah is driving demand in an area coined Emerging Sharjah. Inquiry levels rose 50 per cent between the first and second quarters of 2019 and this is expected to continue into 2020.

Residential values in Egypt have stabilised after a few years of rapid price growth. Underlying fundamentals are still strong as supply fails to keep pace with a large, rapidly expanding population, although affordability is a concern. A potential oversupply at the top end of the market means there is a move towards building smaller, more affordable units. Branded residences are a growing trend that is expected to increase the appeal of Egyptian property to international buyers.

Saudi Arabia’s opening-up to international investment is unprecedented and may provide an opportunity for pioneering foreign buyers.

Henry Pryor, high-end buying agent

The world is perhaps a more uncertain place as we look forward to 2020. I was, on reflection, perhaps not cautious enough in my predictions for the past 12 months. It is easy to be optimistic at New Year.

Africa may hold the biggest potential in the next year as Asian investors continue to pour money into many parts of the continent. Russian and Middle Eastern buyers are also looking to build on commodity interests in Africa and it seems like a period of stability is overdue, which may bolster confidence in some countries.

Money is still drawn to the Middle East like a moth to the flame, but more cautious investors are sensing the time has come to move on. Braver, or perhaps more naive, investors remain, but risks appear to outweigh possible rewards for all but a handful.

Europe retains its triple-A rating for most property investors and a lot of speculators. Not without risk, the region remains popular and relatively safe. Some parts along the eastern flank (Croatia, Albania and Montenegro) are drawing in speculators, but real money still loves the traditional markets such as London, Paris and Rome, despite higher buying and holding costs. Look along the east coast of the Adriatic in 2020 for the biggest bets to be made.

Yolande Barnes, professor of real estate, The Bartlett Real Estate Institute, University College London

This year will be when the great asset price inflation of the late 20th and early 21st century is complete in many Emea real estate markets. There are still a few opportunities in emerging markets and growing cities to ride the last waves of asset price growth, but the aim of real estate investing is moving towards income generation rather than capital trading.

Real estate buyers will increasingly look at the amenity value and cash flow implications of owning, and this applies to residential owner-occupiers as much as commercial institutions.

Prime markets in the UK, particularly London, have already seen the last of the very high rates of growth, which many commentators think is normal and owners have come to expect over the past 60 years. The postwar inflation era is long over and the dramatic falls in interest rates or yield shift that have driven all sorts of asset prices upwards since the 1990s has ended.

Future growth in real estate prices will depend, as it did in previous centuries, on occupier fundamentals; that is, drivers of rental value such as household income, demand and supply — rather than speculation and investment. The question is not how the market is moving but how individual assets are performing: is value being added? Is the productivity of a piece of land being increased?

This is the year when we will start to recognise that some so-called assets can also be liabilities. Successful owners in future decades will be the ones who can tell the difference.

Trophy homes: how the super-wealthy struggle to value their properties

By Judith Evans

Luxury homes have morphed into a global currency — a tangible asset with cachet

How much would you pay for a 20,000 sq ft neoclassical mansion close to London’s Buckingham Palace, complete with an underground extension and private formal gardens — not to mention the swimming pool, gym, spa and staff quarters?

Ken Griffin, the billionaire founder of the Chicago-based hedge fund Citadel, settled on £95m. This is the approximate sum for which, earlier this year, he bought 3 Carlton Gardens, a newly restored London home that was the private office of Charles de Gaulle during the second world war. 

But that was a steep markdown from the £125m at which the home had been marketed — and even more so from the £145m the developers had originally hoped the reimagined Nash-era mansion would fetch. That £30m price differential is the price of a David Hockney painting, a gold mine in Russia or the League One football club Charlton Athletic.

Such negotiations are becoming increasingly common as the world’s ultra-wealthy increase in numbers and the market for properties aimed at them becomes larger and more international.

Yet the different dynamics in the “super prime” property market mean developers, agents, lenders and buyers can face an extended wrangle to establish the “real” value of a home, in a market where prices run into eight figures and many of the normal metrics — such as rental yields or comparisons with similar homes — often do not apply.

Neal Hudson, founder of the consultancy Residential Analysts, says the value of super-prime residential property is “a bit like the art market: some things are only worth what the next person is willing to pay for it. There’s not an underlying economic value there that it’s rationally based on, like the percentage yield from an office block in the City.”

The world’s ultra-wealthy, those with net assets of more than $30m, increased by 4 per cent in 2018 to almost 200,000 people, according to Knight Frank’s Wealth Report, which predicts their numbers will reach almost 250,000 by the end of 2023.

People in this bracket increasingly own a portfolio of trophy homes in global cities, agents in the sector say. Griffin is a case in point: his £95m London house, and a penthouse apartment in the city he has agreed to buy for about £100m, add to a portfolio of homes in Miami, Palm Beach, Chicago and New York, including Manhattan’s most expensive home, a new-build penthouse bought for $238m.

Jonathan Miller, a New York housing analyst, wrote in a report: “Luxury real estate has morphed into a new world currency that provides investors with both a tangible asset and a cachet that cannot be found within the financial markets.”

Prices for luxury homes are falling in London, New York and more than 20 other cities globally, according to Knight Frank. But discounts on homes costing more than £10m in London are on average less steep than on less expensive “prime” properties, according to figures from LonRes, a data source; agents say buyers in this market can be less sensitive to price movements than those lower down the scale. 

“People with very deep pockets see something of value and will pay a lot of money for it still,” said Charles McDowell, a Mayfair estate agent.

Garrett Derderian, director of data at the New York real estate agents Stribling, agrees. “What we’re seeing, especially in the Manhattan market right now, is an increasing disparity between the super-wealthy, those buying homes for $30m or above, and the mere wealthy.

“The super-prime market has diverged from the rest, at least in terms of the numbers of transactions happening even as the wider market is softening.”

The figures may be skewed to an extent by completions of new-build properties where sales were agreed in previous years, he notes. But Derderian believes the market has been bolstered by the scarcity value of the properties billionaires look to acquire, such as those overlooking Manhattan’s green space. “There is only so much Central Park,” he says.

Valuing a home in the mainstream market is made easy by the thousands of transactions of similar homes that take place each year. But assessing the value of a top-end mansion is less straightforward, says Jonathan Harris, director at the London-based mortgage brokers Anderson Harris. “It’s all about comparables, but they are trickier when you are looking at higher values. There tends to be fewer of them and much lower levels of activity; the homes can be quite unique. It can be quite subjective.”

The higher the price, the slimmer the field of comparable properties. “Super-prime” or “ultra-prime” homes start at anywhere from £10m to £30m, depending on which agent you speak to; for homes costing more than £50m, the market “is not so much a market as a handful of anomalies,” says Roarie Scarisbrick, a London buying agent at Property Vision.

Valuers may take into account potential rental yields, but only if a buyer is purchasing with a view to letting out the property (not something Griffin has indicated he will do). More broadly, says Dominic Grace, head of London residential development at Savills: “Yield has never been a driver for super prime buyers.”

Agents who buy and sell homes at the very high end say their market does operate, to some degree, logically. Buyers still pay for size, views and extras, whether it be a 10-car garage, full-sized home cinema or Olympic-sized pool.

Philmore Gardens in London’s Holland Park is one of the city’s most exclusive streets. © Alamy Stock Photo

McDowell says location is crucial to a home holding its price over time. A particular street can underpin value in a way that another road close by does not.

Phillimore Gardens, a street of Georgian villas backing on to west London’s Holland Park, is a “blue-chip” street, McDowell says. A seven-bedroom family house there is currently on sale for £30m. The street’s location between Holland Park and Kensington High Street, its freedom from “rogue traffic” and its unusually large homes for the area all play a part in that appeal, he said — against a backdrop of the street’s position in one of the capital’s most exclusive postcodes.

‘Location is crucial . . . a particular street can underpin value in a way another road nearby does not’. (Charles McDowell, a Mayfair estate agent).

Rarity adds to value: few homes can boast of being less than a kilometre from the Queen’s residence and of previously being used by the UK intelligence service to interview potential recruits, like Griffin’s 3 Carlton Gardens.

Values for high-end homes may be falling now around the globe, but they have increased in recent decades. Knight Frank’s Prime Global Cities Index, an unweighted index of price changes that tracks the most expensive 5 per cent of homes in major cities — less rarefied than the “ultra-prime” market — indicates that the typical value of prime properties being traded has risen 59 per cent across the world since 2006, or about 4.5 per cent a year on average, not taking into account costs associated with ownership.

The figures vary significantly by city, according to separate data from Savills, which says price growth can be fuelled not only by domestic wealth increasing but by a “promotion phase” when a city turns outward to become a global destination.

In 10 years, prices for prime homes in China’s Shenzhen have risen 388 per cent and Beijing 322 per cent, Savills said. In Berlin they have more than doubled, rising 118 per cent, and in San Francisco 80 per cent. London prices rose 41 per cent and New York 40 per cent. 

In Manhattan, super-prime homes are dominated by new condominium blocks that have mushroomed since the financial crisis, says Derderian. These now make up the “overwhelming majority” of homes changing hands at the top end.

Residence 14d in 15 Central Park West, Manhattan sold for $29.5m in 2017 © Alamy Stock Photo

The relative newness of these homes makes it difficult to track long-term values, but 15 Central Park West, a complex completed in 2008, gives some indication. Residence 14d in the building sold for $21m in 2007 and then $29.5m, a rise of 39 per cent, almost exactly 10 years later, a rise in value of 3.9 per cent on average each year. 

‘Super prime properties hold their values over time if and only if the property is incredibly rare’. (Lauren Muss, associate broker at Douglas Elliman in New York).

For that price, residents get not only an apartment overlooking Central Park replete with marble and chandeliers, but also a private climate-controlled wine room and access to a 14,000 sq ft fitness centre, billiards room, private dining service and movie theatre.

But this price movement excludes costs, which may be substantial. Another luxury apartment in Manhattan, currently being marketed for $57m, is charged monthly taxes of almost $17,600, while common charges, known in the UK as service charges, come to a little more than $15,000 a month: a fairly typical set of costs, says Derderian. That comes to almost $400,000 a year of costs — and that is before the buyer has even hired their domestic staff. Still, that sum amounts to less than 1 per cent of the property’s asking price.

As new homes tailored to the ultra-rich begin to change hands in the secondary market, more evidence will emerge of long-term pricing in this exclusive market. A similar rising trend is evident in One Hyde Park, an ultra-prime block completed in 2009 in London, boasting a 21m ozone swimming pool, golf simulator, private cinema and dozens of dedicated staff from the nearby Mandarin Oriental hotel.

Nick Candy, one of the block’s developers, says there is “increasing demand from wealthy investors and families to own one of the best addresses in the capital”.

He might be expected to say this, but the numbers bear him out so far, says Scarisbrick of Property Vision. Flats on the more desirable side of One Hyde Park, facing the park itself, sold for £4,000 to £5,000 a square foot in 2007 ahead of completion; they are now changing hands for about £7,000 a square foot, he said.

“The better flats in this building, high up and with a better outlook, have definitely outperformed the rest,” says Scarisbrick.

Other transactions show the dizzying effect of cyclical movements. Another apartment in New York’s 15 Central Park West was bought for $11.6m in 2008 then sold for $21.5m, or 85 per cent more, less than two years later, says Derderian.

By mis-timing the cycle, it is equally easy to lose millions. The Russian buyer of one apartment on London’s Chesterfield Gardens bought the home in 2009 for £19m and sold it recently for £13m, according to an agent with knowledge of the sale — a loss of £6m, before taking account of taxes and other costs.

The current cycle has also caught out a series of developers who carried out refurbishments of period properties, only to be forced to sell them as the market slumped, said Camilla Dell, managing partner at Black Brick, a buying agency.

One home on Cresswell Place in London’s Kensington was marketed for £37.5m but sold for 40 per cent less, at £22m, she says. For super-prime property to hold its value over time it needs to be “the right super-prime, without compromise”, she adds. That means “a very long lease or freehold” and “not just the right address, but the right part of the right address”.

For example, ultra-wealthy buyers will seek out a location such as London’s Chester Square because “you can’t buy anything there for less than £10m, so there’s that recognition of an address that means ‘I’ve made it in life’,” says Dell. But the most valuable homes are on the sunny side of the square, away from the traffic. “Homes on the wrong side of the square will never achieve so much,” Dell adds.

Lauren Muss, associate broker at Douglas Elliman in New York, agrees. 

“Super-prime properties hold their values over time if and only if the property is incredibly rare and offers buyers a true, once-in-a-lifetime opportunity,” she says. “I have been in this business a long time and have seen people overpay for average townhouses or apartments.”

Griffin may have negotiated hard when buying his London house, but he has not said whether he views it primarily as an investment. 

He told the Chicago Tribune four years ago: “When people make a decision to buy a piece of high-end real estate, it’s not just an investment. It’s where they spend time with their family and their loved ones.”

How to sell a house that doesn’t exist The computer-generated images used as off-plan marketing tools are increasingly picture-perfect

By Patricia Nilsson

Vincent Flynn can see into the future. “I know what shape and size London will be years ahead of other people — that is one of the joys of this industry.

”The company he founded in 1999, Visualisation One, crafts computer-generated interior and exterior images of high-end properties, many of which do not yet exist. Using digital 3D models, Flynn’s team helps property developers show potential buyers what they are bidding for.

With the right mix of artistic and technological flair, a CGI can be so lifelike it is difficult — if not impossible — to tell it is a rendition of something that does not yet exist.

Visualisation One’s images are eerily realistic, with details handcrafted by creative specialists. High-quality work does not depend on fancy software, Flynn says, but on the 24 artists who work at the company, based in Chester. “It is not a mechanical process, but an artistic process,” he says.

Property developers will hand over architectural specifications, even down to the detail of door handles. The visualisation artists then mould 3D models of the building and everything that will be shown within it, from early-stage digital “clay models” that outline the proportions of a room to the leather stitching on a sofa.

The staged image

STEP ONE – An image of a room at Alchemi Group’s Westminster Fire Station development in London (top) was created by Visualisation One. The so-called “white card” image is the 3D model of the room based on the floorplan and the angles that the artist feels best represent the room’s potential.

STEP TWO – The first round rough draft for styling so the furniture visualisers can get an idea of actual scale, proportion and style of items that will feature

STEP THREE – The wireframe – a three-dimensional model that only includes vertices and lines to illustrate the working model before creating the final image, which can be shown to potential buyers.

One image will usually take the company between five and eight days to complete, as accuracy is key. “If you show someone a lovely image of a kitchen, and two years down the line they walk in and the kitchen is different from what they bought [ . . .] then we believe the developer will lose all credibility,” he says.

But a disappointed buyer would be unlikely to make a legal claim citing a misleading CGI, says Laurie Horwood, partner at Farrer & Co. “A developer would make clear you cannot rely on marketing material, and that CGI are indicative only,” he says.

“There are certainly studios that do not mind bending the truth, but the developers that we work with would not tell us to edit out large buildings [that might block views],” Flynn says.

But developers and visualisation studios can run into trouble with CGI. At the end of last year, property developer Fairview New Homes removed a mosque from promotional material of new-build homes in Hornsey, north London. Fairview New Homes declined to comment for this article.

Anna Parry, partner and projects director at London-based CGI studio Hayes Davidson, says the accuracy of computer-generated marketing material comes down to the integrity of the property developer and studio. Aside from tidying up rubbish from streets, her studio will sometimes remove cranes or “complete” a neighbouring property that is being built in order to show the view that will be there. Parry says her team has never been asked to do edits it has not felt comfortable with.

What is more likely is that developers choose to showcase the most exceptional rooms and views in a development in their marketing material, says Alex Oliver, buying consultant at the buying agency Black Brick. “This can be slightly misleading,” he says. “There is no substitute to visiting the site, to get the ambience of the area and ensure you get a unit with a good view.”

An example of how prospective buyers might benefit from visiting a site is London’s Neo Bankside. Some of its residents have said they were not aware the neighbouring Tate would provide a platform for museum visitors to peer into their homes. Native Land, which developed the property, says its CGI marketing material had included imagery that showed the Tate’s viewing gallery, adding residents had not complained about it being misleading.

Flynn believes interactive content will grow in popularity. His studio is already dealing with requests for material, such as digital images, that enables potential buyers to see how a room would look like with different colour schemes, or virtual reality experiences.

Giles Stevens, acquisitions director at luxury developer Elysian Residences, says CGI marketing is particularly important to the company as it targets older buyers, many of whom have never bought property off-plan before. “Communication from us to them needs to build trust and take them over the threshold of one of the biggest decisions they will take in a long time,” he says. “It is a bit of a cliché, but a picture says a thousand words.

”According to Stevens, some studios create work that is “more affordable and less convincing”, adding Elysian Residences will spend between £3,000-£5,000 on each CGI image. “Creating an inspiring and beautiful image of what we are building is crucial,” he says. “If you cannot sell the units at the end of the day, then the whole purpose of property development does not make sense.”

“We are in a challenging market at the moment,” Stevens says, explaining how high-quality marketing material is expected to help developers sell as buyer demand stalls. The company also commissions film walk-throughs or scale models of properties.

In the end, says Flynn, digital artists are helping to sell a dream. His team will even dictate the weather in the worlds they create. Judging by property listings, one could believe the sun always shines.

“We do have rainy days in this world as well. Some clients — particularly architects — like muted imagery,” says Flynn. One of his creative directors, Patrick Corcoran, adds: “Although it does seem to look like the Mediterranean most of the time.”

 

Trickle-down economics

Boris Johnson has used some contentious turns of phrase. Aside from the extraordinarily witless remarks he made about burkas, he once compared female volleyball players in the 2012 Olympics to “glistening wet otters frolicking”. But his claim in 2014 that London was “to the billionaire as the jungles of Sumatra are to the orangutan” perhaps demonstrated more foresight than he knew. London’s property market was once such a natural habitat for Russian oligarchs that The Washington Post called it “Moscow on Thames”; nowadays, they are starting to look wholly endangered. By 2016, Russian demand in London was “practically dead”, says Dmitry Zakirov, director of Russian language property consultants LonGrad. In the wake of tax changes in the UK and restrictions on money leaving Russia, he estimates that the number of Russians buying in London dropped 75 per cent in a year. Numbers were beginning to recover, he adds, but have since slumped again thanks to the introduction of unexplained wealth orders in January, which permit investigators to seize unaccounted for assets, the souring of Anglo-Russian relations following the Skripal attack in March, and the subsequent decision of the UK government to re-examine 700 Russian visas. Even Roman Abramovich, the billionaire posterboy of Russian investment in London, has got himself an Israeli passport— and there were rumours this year that he’s considering selling Chelsea FC, which the club denies. But it’s not just the Russians.
 
The international share of the market in prime central London dropped from 52 per cent in the first half of 2014 to 39 per cent in the first half of this year, according to Hamptons International. The drop looks even more pronounced when you account for the fact that the volume of transactions over that period has fallen by at least 30 per cent, according to Liam Bailey, global head of Knight Frank Research. The appeal is not sweetened by the fact that London property, while still among the most expensive in the world, is a depreciating asset — and getting harder to shift. As of July, prices for homes in prime central London had dropped by 3.8 per cent in a year, according to Savills, and are 18.4 per cent down from their peak in 2014. Back then, demand for London property among rich Russians was stratospheric. Thea Carroll, senior buying consultant at The Buying Solution, describes her clients as being “hyper-demanding and glamorous and ridiculous on another level”. One Christmas Eve a Russian client phoned her to ask if she could remove a bumble bee from their bedroom. Developers were targeting Russians with expensive marketing plans and regional sales shows, says Alisa Zotimova, chief executive of AZ Real Estate, which specialises in finding homes for Russian speakers in the capital. There was a flow not just of “mega-rich Russians” but of those buying properties from £2m up, says Zakirov.
 
“The whole landscape started changing massively from 2014 onwards,” says Camilla Dell, founder and managing partner at Black Brick Property Solutions. “The Russian market dropped off along with lots of others”. Along with that year’s stamp duty reform — which increased the tax bill on all homes priced above £937,500 — changes to capital gains and inheritance taxes, the government also started reforming the Tier 1 “golden visa” programme. In November 2014, the price of the visa doubled from £1m to £2m and then, the following April, a more rigorous system of background checks on applicants’ sources of wealth was implemented. The number of investors moving to the UK fell by more than 80 per cent in the year to March 2016 compared with the year before.
 
The anti-money laundering laws “changed a lot”, says Carroll. “I had someone who tried to pay 10 years upfront for a rental in cash before, and in the huge trophy market I think there was a fair amount of [money laundering] going on”.
 
While overall numbers of overseas buyers have been falling — and may yet reduce further if the 3 per cent stamp duty premium for foreign buyers, proposed by the government in September, is imposed — it is still the case that the higher up the value curve one goes, the higher the proportion of international buyers.
 
Dell puts the foreign share of the £10m-plus and £20m-plus markets at 60 per cent and 80 per cent respectively. “I can’t remember the last time we did a deal with a British domestic client in excess of £20m,” she says.
 
According to some agents, rather than ease the affordability crisis for ordinary Brits — which is what Theresa May said the intention of the proposed foreign stamp duty increase was — the levy will worsen London’s housing shortage. “You need to have international buyers purchasing off-plan to support the bank debt in the cycle of development,” says Ed Lewis, head of residential development sales at Savills. If foreign investment is penalised, fewer new homes might be built as a result, says Dell. Russians are moving out of London’s residential market to chase returns.
 
Zotimova notes one client who has just put nearly £5m into a hotel at Manchester airport. “We are refocusing on other regions in the middle and north of England,” says Zakirov. “Anything from Bedford to Sunderland.” Others are going further afield: “Buying a supermarket in Germany seems to be the flavour of the day,” she adds. For those Russians set on London, renting is a preferred option to buying, says Zotimova. “People like London and they see themselves living here but they’re not sure that in three years’ time all of their family will have a legitimate chance to live in the UK,” she says.
 
The developers behind the 50-storey Aykon London One tower in Nine Elms, which is due to complete in 2020 and will feature interiors by Versace, are perhaps hoping that being London’s first “fashion-branded” residential development will make the apartments more appealing. The Russian property platform Tranio is marketing a five-bedroom apartment with concierge and access to a residents’ swimming pool for £13.5m.
 
On Bishop’s Avenue near Hampstead Heath, Glentree Estates is selling an eight-bedroom detached house behind imposing security gates for £12.5m.
 
Educational institutions are still a universal pull, says Bailey, who estimates that £2bn in foreign purchases have been made in the past 12 months that have been motivated by education.
 
Zotimova notes the problems of sourcing a pet-friendly home for one granddaughter of a Soviet ballet dancer who came with her dog. Yet as Russian buyers may be moving on, Turkish buyers, who want to hedge their money against the falling lira and political uncertainty at home, have been on the rise since 2016, say agents.
 
The numbers are still very small, says Carroll, “but in the last two years it must be double”. Golden postcodes such as Belgravia and Chelsea are most popular, says Nathalie Hirst, a buying agent. “They are later to the game in the millionaire world and they work on the fact that if you buy in Knightsbridge it will always sound swish,” says Carroll. 
 
Of the £4.4bn-worth of UK property bought with “suspicious wealth”, £4.2bn is in London, and a fifth is bought by Russians, according to a report last year by Transparency International UK, writes Hugo Cox. The majority flows through shell companies — foreign firms own roughly 40,000 London properties this way. “Corrupt individuals [need] a getaway vehicle and a safe place to stash their stolen loot. Anonymous companies are the getaway vehicle and UK assets, such as property, are the safety deposit box,” says Duncan Hames of the organisation. Transparency campaigners are not the only ones sounding the alarm. In its annual report in May, the National Crime Agency (NCA) singled out London’s property market as a target for laundered money from Russia, Nigeria and Pakistan. Since the poisoning of the former Russian double agent Sergei Skripal and his daughter Yulia in Salisbury in March “ministers have spoken with renewed vigour about creating a hostile environment for dirty money”, says Hames.
 
The UK introduced a public register of companies in 2016 and has committed to introducing a register of the beneficial owners of overseas companies that hold UK property. But checks on the accuracy of the register, maintained by Companies House, are limited. The only person to have been convicted for faking records was Kevin Brewer, a businessmen who set out to demonstrate how easy it was to do so (one firm he created, Cleverly Clogs Ltd, included the government minister responsible for Companies House as a director). “Unlike David Cameron, I just don’t think Theresa May is that interested,” says Oliver Bullough, author of ‘Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back’. “Rich Russians deserting London property has much more to do with the fact that the value of the rouble has tanked.”