Super prime property in key gateway cities are growing in popularity amongst ultra-high net worth individuals. Nicholas Keong, Head of International Project Marketing talks us through how the super prime property market is performing and why interest in UK property from overseas buyers is surging despite uncertain times.
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Speakers:
Hector Tan | Head, Marketing and Communications | hector.tan@sg.knightfrank.com | +65 6228 7337
Nicholas Keong | Head, Residential (International Project Marketing) | nicholas.keong@sg.knightfrank.com | +65 6228 6870
Edited Transcript:
Q: Understand you and your team are focused on the UK market, the situation in UK is very different (lockdown, Brexit etc) how you been affected by these recent events? How has overseas buyer interest evolved since the start of 2020 – before the lockdown?
Following several years of political uncertainty surrounding Brexit and several tax changes, we saw a market that has repriced over the last 4 years. There was optimism building in the market during the second half of 2019 and the lead up to the UK general election and a build up in pent-up demand.
The strong general election result produced a generally positive outlook that continued to the start of 2020 where we closed on several ‘larger ticket’ transactions and expected momentum to continue through the rest of the year.
Unexpectedly the world was hit with Covid-19. With the world going into their own forms of lockdowns, the ability to meet our buyers and conduct face-to-face activities came to a halt. Fortunately, the wider range of digital tools available enabled our agents to engage with buyers in a meaningful way; presenting opportunities through virtual viewing, educating our buyers via webinars on the market, taxation and mortgages, helping them make more informed decisions.
Underlying demand from Singaporean property investors persisted, for residential property in key gateway cities, especially so for London. This was in part driven by familiarity, process and rule of law, and the draw of world-class Universities for parents to send their children abroad. Combined with higher purchasing power, a low interest rate environment, these continued to be key drivers of demand for London property.
Q: Lets talk about Super Prime Property. What defines as a Super Prime Property?
Super Prime Property is of course defined by its location but generally properties north of GBP10mill.
Q: Despite the lockdown, our colleagues in the London office reported that since Jan there was a £1.13 billion spent on London Super-Prime Property, this is 16% higher than the figure of £977.5 million recorded in 2019. Would you say this increase is rather surprising?
This is not surprising at all. Super Prime Property is extremely rare, it rarely comes onto the market and given the interest rate I eluded to earlier. As well as the sterling pound remaining quite suppressed against most major currencies, and the appeal of London to international buyers. Its no surprise that investors admits the uncertainty gravitate toward real assets, super prime property being one of them as stores of value.
Q: How do you think the super prime property market has evolved over the years? Since 10 or 5 years back?
Super Prime Property has always been highly sought after; a real asset ultra-high net worth individual’s still see as part of their portfolios as a long-term store of value. More wealth is being created in the world than ever before which continues to move across borders, and with more ultra-high net worth individuals based in London than any other global city and the propensity to invest in real assets, the super prime market is one that is highly contested, more so than ever before, especially with adoption of technology and digital tools making it even more accessible.
Q: What are some key areas in London to look out for? (Mayfair? Knightsbridge?)
London’s Super Prime markets generally found around Hyde Park, such as Mayfair, Knightsbridge, Marylebone, Kensington, Chelsea, Belgravia and Bayswater. But also extend to the areas of Notting Hill, St Johns Wood, and Hampstead
Q: What can we expect property prices to be like post pandemic?
Lack of supply of super prime property has cushioned prices however prime sales are back to pre-pandemic levels and as a result, our research is forecasting 3% growth in 2021, accumulative growth of 25% over the next 5 years.
Q: What about rental market in London? How has it been reacting?
The rental market has been challenging and seen a decline in rents due in part to the absence of overseas university students and corporates, but also due to a surge in supply as landlords switched from holiday lets to long-term rentals. We expect this to reverse once a vaccine is in play and international travel resumes. With university student and corporates return.
Q: With lockdown in place, working from home and self-distancing. I believe buyer preferences have changed remarkably, what are some changes in demand you have seen? (increase in outdoor space? Countryside market? Increase demand for houses compared to flats?)
The health pandemic saw homebuyers and renters re-evaluate their living arrangements re-emphasising the notion of ‘my home, my sanctuary’ where we saw priorities shift, with more emphasis placed on access to outside spaces such as green parks, waterways, balconies and terraces. This includes accommodation that are new and fresh with more space, and within developments that offer an array of amenities such as residents’ lounges where residents could work from home outside of their own apartment, cinemas, and rooftop areas; which in turn drove investment decision from our buyers.
Our Country Division had an amazing year, driven predominately by the domestic market with the desire for more space both indoors and outdoors. What will be interesting is if this will sustain as we emerge from the pandemic and the eventual return to the office environment, at least partially if not in full.
Q: Interest in UK property from overseas buyers is surging as investors look to take advantage of the current stamp duty holiday which ends on March 31 2021. Can you elaborate more on the conditions to this stamp duty holiday?
The Stamp Duty Holiday has certainly been a catalyst for buyers to move forward with their purchase decisions. The stamp duty holiday applies to the base rate on properties worth up to £500,000, where purchases under this threshold will pay 0% stamp duty. For buyers purchasing above this threshold, they stand to still benefit from a maximum of £15,000. Second home buyers and investors will benefit them same, however the 3% buy to let and second home surcharge will still apply. As a result, we’ve seen investors by and large look for properties within the qualifying threshold, either built-complete or nearing completion ahead of March 2021 deadline.