As IRG Ltd is in the very fortunate and beneficial postition of being the Cayman Islands Affiliate for Knight Frank, we have the benefit of sharing all the latest global real estate trends with you, our clients and readers.
This latest news just in from Knight Frank London shows a remarkable and notable increase in 10 million sterling-plus transactions! As you read this very informative article you will come across the sentence; "The Russians are back" and you will also see that Chinese investment in the city of London is growing exponentially. This leaves IRG Ltd with the knowledge that, as the Knight Frank affiliate in the Cayman Islands, we are in a unique and fortuitous position to bring these highly qualified buyers to you, our vendors.
Between January and October this year,the number of £10 million-plus Knight Franktransactions in London increased by a thirdcompared to the same period last year and was92% higher than in 2012.
It may seem counter-intuitive given speculationover the sustainability of price growth in primecentral London and the prospect of a mansiontax after next May’s general election, whichhave both resulted in more subdued demand.However, a large contributing factor is thatvendors, who are typically discretionary sellers,have lowered their asking prices by between 5%and 10% in order to achieve a sale.
“Once buyers re-priced at a more realistic leveland the gap between the expectations of thevendor and the buyer closed, it triggered a flurryof activity,” said Tim Wright of Knight Frank’sPrime Central London team.
In June and July this year, Knight Frank sold asmany £10 million-plus properties as during theprevious four months combined.
“There has been talk of a drop in the numberof transactions in the market and a slowing ofprice growth but this is due to the lack of data inthe public domain,” said Richard Cutt of KnightFrank’s Prime Central London team.“In the last quarter there have been a largenumber of flats bought from plan, ‘off market’,which have moved prices up and in some casesquite significantly. These sales only becomepublic on completion and would paint a differentpicture of the market if they were factored intoday. An example of this is the success ofBritish Land’s Clarges Mayfair development.”
The higher number of transactions is alsounderpinned by strengthening demand inrecent months, with Russian buyers re-emergingafter a period of uncertainty andChinese buyers increasingly active in the £10million-plus price bracket.
“The Russians are back,” said Tim. “After aperiod of uncertainty and instability, they appearto have more clarity on where they stand, whichhas given them the confidence to get back intothe market.”
In the six months to October, Russian buyersaccounted for 21% of super-prime salescompared to 13% over the preceding six monthperiod.
Given the economic backdrop in Russia, thereis a marked difference between those that holdassets in roubles and those in US dollars, whichis curbing the buying power of some.
This year also saw mainland Chinese buyersbecome active in the super-prime market forthe first time, accounting for 3% of sales afternegligible demand in previous years.“We are beginning to see some serious interestfrom ultra-high net worth mainland Chinesebuyers,” said Tim. “Interestingly, it seems to be houses rather than flats or investment properties. These are buyers who clearly intend to spend time living in London with their families.”
Signs of weakness in the Chinese economy mean there is an element of a ‘safe haven’ purchase. However, Chinese companies are growing their global footprint, which is also driving demand in London.
The rising level of Russian and Chinese interest is underlined by the growing number of Tier One investor visas granted to nationals from the two countries. Though there has been strong growth this year, to some degree this is due to the fact the visas became more expensive in November, with demand rising before the change.
Prices of £10 million-plus homes have risen 48% since the last low-point in March 2009 but annual growth has been moderating since the double-digit rises recorded after the financial crisis, easing to 3.3% in October. “Some buyers will remain cautious in the run-up to the general election,” said Richard.
“However, the sort of global geopolitical instability that drives capital into London and underpins demand will remain.”