Our Journal

Published in PrimeResi 10/01/20

Many luxury property industry insiders are looking forward to the next 12 months with vim and positivity. “There is more confidence in Prime Central London now than there has been in years”, remarks buying agent Hannah Aykroyd, while Fraser Slater of Ludgrove expects the Prime London property market “to regain its mojo in 2020”, and Glentree’s Trevor Abrahmsohn thinks that, in the wake of December’s Conservative election win, “there is nothing to hold back the prime residential property market, particularly in London.”

But others are more cautious about the market’s prospects. “The structural issues in the market remain the same and boom time is unlikely,” tempers Roarie Scarisbrick of Property Vision, pointing out that “stamp duty is still cripplingly expensive and we are about to be hit with yet another 3% surcharge for foreign buyers which will hit central London hard.” Knight Frank’s London research chief Tom Bill is also not expecting a surge in property prices, as rising supply keeps a lid on inflation; “any increase in sales volumes is unlikely to be accompanied by meaningful house price inflation in 2020,” he says.

Looking beyond pricing, supply and demand, we’re likely to see a continuation of last year’s buzz phrases and watchwords: sustainability, wellness and flexibility all crop up frequently in the forecasts, while buyers’ quest for quality and price sensitivity continue to force developers and agents to stay at the top of their games.

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We polled some prime resi regulars for their key predictions for the luxury property scene in the coming year; here’s our pick of the 2020 trends to watch…

More sales market activity in London

“There is nothing to hold back the prime residential property market, particularly in London”, declares Trevor Abrahmsohn, the outspoken boss of North London estate agency Glentree Estates. Boris Johnson’s majority Government is promising some much-missed certainty over policy direction, if not policy specifics just yet.

There’s a widespread belief that both vendors and buyers will spring into action in the early part of this year, releasing pent-up supply and demand that could see a flurry of significant deals being done in the next few months. “The imbalance between supply and demand that was a feature of the [London] market last year should start to be redressed in 2020,” predicts Knight Frank’s Tom Bill. “Supply is likely to rise as more sellers anticipate a post-election bounce.”

Buying agent Hannah Aykroyd is expecting prime transaction volumes to “increase significantly in 2020” – continuing a trend seen towards the end of last year. “In the third quarter of 2019, contract exchanges rose by 24% compared to the previous year,” she says. “At Aykroyd & Co we have been even busier in Q4 – and we’re not alone. It’s important to remember there has never been lack of demand in the PCL market over the past 12 months – rather there has been a lack of good, well-priced stock. As sellers feel more confident about prices, stock will levels rise, and we expect transaction levels to follow suit.”

March’s Budget event could be another driver of immediate sales activity. As Jamie Read, Director at Tavistock Bow, points out: “If the government does decide to increase Stamp Duty for overseas buyers in the next budget, we would expect to see a flurry of enquiries & transactions in central London before the end of the tax year.”

Developers are also positive about sales prospects in 2020. Mark Hutton, Head of Residential Sales and Lettings at Battersea Power Station, is expecting residential demand “to remain strong as activity increases amongst needs-based buyers and London’s underlying fundamentals continue to attract international residents.”

But there are some more cautious voices amongst the bulls. “The luxury property market in 2020 will begin to see some movement again,” says Saul Empson of Haringtons, although the veteran buying agent sees this year as “a game of two halves”: “In the first half, I think we’ll see some of the old chestnuts on the property market sell fairly quickly, and the next generation of homes come to the market at elevated pricing,” he says. “The second half will then be dictated by a struggle to close the gap between vendors and purchasers. This will certainly be the case in Prime Central London as people start to buy and sell again and yet, the supply just isn’t there.”

Guy Meacock of Prime Purchase is expecting more activity in prime London, but also anticipates a gear-shift between the first and second halves of the year: “We expect this year to be front-loaded,” he says, “with the busiest quarter likely to be the first one and then through the spring to the summer. But as we get nearer the end of the transition period we may see things tail off. Good property will shift as before but buyers will have to take a long-term view on those flats and houses that have sat on the market. The difference is now they have the confidence to do so.”

Roarie Scarisbrick of Property Vision is markedly less positive than others about market prospects. “Whilst the agents are predicting a new bull run in our markets off the back of December’s election result, buyers launching themselves into the market this quarter will soon be reminded that stamp duty is still cripplingly expensive and we are about to be hit with yet another 3% surcharge for foreign buyers which will hit central London hard,” he warns. “So while we will be busy with buyers who have been sitting on their hands for a while, and transactions will pick up, the structural issues in the market remain the same and boom time is unlikely.”

Notable but modest price inflation in prime London

“Any increase in [London] sales volumes is unlikely to be accompanied by meaningful house price inflation in 2020,” says Tom Bill, Head of London Residential research at Knight Frank, summarising a widely-held consensus amongst prime resi pundits.

“We expect to see a notable but modest increase in residential prices in PCL in 2020,” forecasts Hannah Aykroyd, while Paul Clarke, co-founder of US broker-style estate agency Mr and Mrs Clarke, believes that “prices will gently harden but realistic negotiation will be key in achieving positive market momentum”.

Buying agent Guy Meacock warns vendors of being too greedy in reaction to renewed political certainty. “The election result went the way many in PCL wanted,” he says, “but the danger is that vendors are now firming their expectations too much. For example, there is a house for sale on one of Notting Hill’s premier roads, which has been on the market for three years because while it is a great address it is overlooked and is blighted. A buyer was found who agreed to pay 5% below what is a very optimistic guide price. As soon as the election was out of the way, the vendor had the gumption to say he wanted more money than the £9.5m on the table. And the buyer still paid most of the extra that this vendor wanted. It really is a sign of the times that someone with a blighted property feels emboldened enough to act like that that so what will you see with those with the really good stuff?”

Of course some are predicting big price inflation for the year ahead: new-build specialist estate agency Johns & Co is anticipating a 4% rise for PCL prices over the next 12 months, and Jamie Read of Tavistock Bow is expecting “real signs of a bounce back” for prices in early 2020. “With a vastly improved political backdrop, the threat of a hard-left Government removed and Britain’s transition out of the EU settled we expect the Prime London property market to regain its mojo in 2020,” says Fraser Slater, CEO of buying agency Ludgrove Property. “Strong pent-up demand, limited stock availability and the backdrop of a record five-year long PCL bear market is likely to provide upward momentum and we forecast Prime London prices and volumes to grow around 10% and 20% respectively in 2020.”

Few but fine prime London development launches

“Having completed dozens of developments nearby over the past 20 years I can honestly say that I’ve never known the central London pipeline to be so short”

Charlie Baxter, Alchemi

Alchemi’s Charlie Baxter has noticed a marked shortage of top-end new-build supply in Central London. “It’s going to take a while for supply to recover”, he says, explaining that his team recently carried out a sales and marketing report for Alchemi’s upcoming Westminster Fire Station development in SW1. “We would normally expect to see three or four other developments launching in 2020 – however, we actually found no other new build developments being completed within a mile. Having completed dozens of developments nearby over the past 20 years I can honestly say that I’ve never known the central London pipeline to be so short. Yet as the population continues to grow, I would expect to see an increase in prices to reflect this imbalance.”

Looking at currently-available units, however, others have noticed a glut of supply. “There are deals to be done on certain new-build schemes right now,” says Jamie Read, Director at Tavistock Bow – “thanks in part to the election effect, but also an end of year frenzy from housebuilders looking to shift stock.”

But there are some particularly exciting new luxury launches on the cards for 2020…

Kate Donneky of Rhodium Residence Management is particularly excited about two big super-prime resi launches this year: Regent’s Crescent by CIT and No.1 Palace Street by Northacre. Both “bring an exciting new lease of life to iconic London architecture”, she says. Simon Garcia of Quintessentially Estates flags the same trend with his pick of the year – another historic building conversion, Whiteley’s in Bayswater.

Battersea Power Station is also in for “a pivotal year”, according to sales and letting chief Mark Hutton, in advance of next year’s “big opening”.

Flexible living spaces

“Luxury homes in the UK are being designed very much with ‘lifestyle’ in mind,” says Debi Wadsted, Brand Ambassador for UK Sotheby’s International Realty, “much more so than in the past couple of decades.”

“Flexible living” has been been a buzz phrase amongst developers and designers for a few years now, and the trend is set to continue through 2020. “Flexible living, homes that provide spaces to work and entertain, such as communal residents lounges and private rooms suitable for large gatherings and meetings, will be popular this year as the line between work and life continues to blur”, says Mark Hutton of Battersea Power Station.

“The kitchen is still the heart of the house,” says Wadsted. “It is the prominent room and needs to be able to accommodate a family group or friends.  This is why houses are still being built with oversized kitchen/breakfast/family spaces, taking up a large proportion of the downstairs square footage. In order to break up these spaces as and when required, styled moveable screens become part of an interior styled scheme. Semi fixed partitioning has also become popular and can be used to great effect. Consequently, dining rooms have become almost obsolete and I believe this trend will continue throughout the 20s.”

Jason Orme, property expert for the Homebuilding & Renovating Show, is expecting similar things: “Where people have the space, I expect to see greater adoption of flexible living, with multi-functional ‘day’ spaces combining the eating, cooking and living function and then more cosy ‘night’ spaces.”

Sustainability

Energy efficiency and sustainable property design has rocketed up the priority list for many buyers.

“Over the last 10 years our branches have seen a significant increase in demand for homes with eco-credentials as owners become far more conscious of the cost of running a property,” says Nick Leeming of national estate agency Jackson-Stops. “With waste reduction and energy efficiency such a hot topic, they are also becoming far more aware of their carbon footprint. Therefore, when it comes to buying a new home in the country, regardless of whether it is a new build or a period property, many are keen to understand what eco credentials the home has. It is sometimes assumed that older properties are less energy efficient than new build homes, but owners can make small changes, such as installing new appliances, which can help reduce their CO2 emissions and boost their ‘forever home’ credentials. It is these homes that we expect to fare well in the country market in 2020.”

“Efficiency has started to trump period beauty – especially for the young, and the older generation who have lost their appetite for high maintenance and draughty homes”

Clare Coode, Stacks

Clare Coode of Stacks Property Search agrees. “Buyers are increasingly aware of eco-houses that cost pennies to run,” she says. “A growing sector of property buyers will seek out property that doesn’t leak heat, and that is set up for helping the pocket and the planet. Efficiency has started to trump period beauty – especially for the young, and the older generation who have lost their appetite for high maintenance and draughty homes.”

Demand for sustainable homes will hopefully drive some policy shifts as well. “Clearly there is a huge push for homeowners to reduce their home’s carbon emissions,” says Jason Orme, property expert for the Homebuilding & Renovating Show, “and as a result I expect to finally see some much-needed support announced for the retrofit and energy efficiency sector. This could range from financial incentives for the adoption of greener energy-generating measures (from boilers to solar panels) but more likely there will be significant support for reducing heat demand in existing homes – insulation, better windows and so on. At the very least I’d expect there to be changes to the VAT regime around works to existing homes so that people aren’t taxed for improving their home in this way.”

Wellness

Wellness and health is increasingly at the heart of luxury home design. “Many clients ask for air quality tests before they purchase a property nowadays and we often organise for pollution monitors and filtration systems to be installed before move in day,” says Simon Garcia, partner at Quintessentially Estates. “I predict we will see an increase in demand for homes with the best green spaces, such as private grounds and garden squares, as the wellbeing and lifestyle trend escalates in 2020. People like to feel ‘zen’ in the home and more people are looking into Feng Shui and other pseudoscience’s in order to make it as harmonious as possible. In their eyes this can help anything, from the financial matters they deal with as a family, right through to how well the children perform at school.”

The Battersea Power Station team has noticed a similar trend amongst their first-footers (over 1,000 residents are now living in the first phase, Circus West). “We have been struck by the value that residents place on a strong sense of community,” says Mark Hutton. “We expect to see this continue as wellbeing, happiness and mental health continue to rise up the agenda.”

Kate Donneky of super-prime residence management firm Rhodium highlights five design and development trends for the year ahead:

1. Extensive private training spaces as well as multi-use spaces to be able to host friends for training/classes
2. Separate catering/prep kitchens away from main living/entertaining areas to allow private chefs to prepare healthy targeted meals daily
   Relaxation spaces (free from tech)
3. There is a rise in treatment rooms in developments which suggests an increase in focus on personal beauty/therapy, especially with more and more treatments becoming available at home, this also extends to individual apartments where the resident has their own mini spa.
4. Prioritising the need for lots of natural light, direct access to green and landscaped areas, non-toxic building materials etc.
5. In some schemes we are seeing social communal areas which promote wellbeing and social connections

Security

Safety is another key concern for buyers at the top-end. “Buying trends will be towards properties with high levels of security with safety a top priority,” says Marc Schneiderman, Director at Arlington Residential.

Schneiderman also predicts an end to the “fad for indoors swimming pools”; wealthy buyers are now “actively requesting properties that do not have them,” he says. “They are rarely used, expensive to maintain and often the heating and filtration systems  malfunction.”

Two Prime London hotspots to watch in 2020

Covent Garden

Jamie Read, Director at Tavistock Bow: “Covent Garden is hot property right now and very brexit-proof. We saw some Europeans leave after Brexit was announced (perhaps they changed jobs and went back ‘home’), but they were immediately replaced by very competitive buyers, both commercial and residential, from the US, Asian and Middle East. There has been a change in demographic of residents over the last two years especially; certainly an uptick in the very wealthy – parking tickets on super cars is not just confined to Mayfair! The end of last year saw an influx of affluent downsizers move into to Covent Garden from the countryside, looking for an injection of theatre, culture and restaurants in the later years. They are more left-leaning media savvy types. Covent Garden is the grown up Soho – from street performers and souvenir shops, to Tom Ford, Gucci and the Apple Store, Covent Garden is now globally recognised as both a chic place to live and dine and the entertainment district of choice.

“Covent Garden has the new Red Bull HQ move into Seven Dials, alongside Netflix, Facebook and Google already nearby. There is a HQ there that gives employees a bonus to live within a 15 minute walk of Covent Garden. There is a definite synergy between the Kings Cross regeneration and Covent Garden – the type of tenants are becoming increasingly similar, it feels cooler, more of a place to live not just pass through for shopping.

“The journey of Covent Garden has been interesting to watch over the last 15 years. It’s gone from big institutional landlords with mainly office/commercial portfolios, to REITS like CapCo and Shaftesbury lease holding flats and diversifying into the residential market. This represents a full 360 life cycle for urban transformation there – first concentrating on offices, then cool shops, restaurants and bars, and now places to live. Commercial clients now care a lot about residential and we will see this trend increase during 2020.”

Notting Hill

Hannah Aykroyd, Managing Director and founder of Aykroyd & Co: “There is an almost insatiable appetite for family homes in Notting Hill, Kensington, and Belgravia. These properties are relatively rare – the family homes we transacted on in 2019 were almost all selling for the first time in decades. We expect this to continue into 2020 among best-in-class PCL residential property.”

Simon Garcia, partner at Quintessentially Estates: “Notting Hill will continue to be hot property next year – we’ve seen a huge amount of requests here and super-prime stock sells to off-market buyers who are waiting in the wings for homes to become available. We may see overflow from this pent-up demand into nearby Bayswater, which could well see an uplift next year due to redevelopment of Whiteley Shopping Centre and other new high-end developments.”