London’s property ‘bull’s-eye’ outperforms gold – even in the credit crunch

Figures out today show that while gold is good, housing in the capital has proved a better investment
Paul Smith
Gold-plated gains: Paul Smith sees good profit in housing
Paul Smith, boss of an event management company, paid £675,000 in 2007 for a newly created apartment above a fashion boutique in South Molton Street, in the heart of the West End. The property has just been revalued at £2.25 million, a spectacular increase and proof that buying in the “bull’s-eye” of London is one of the smartest investments that can be made.

The latest Land Registry statistics show that central London home values have jumped 20.8 per cent over the past year, reaching an average price of £1,303,292. This compares with a 6.3 per cent rise for Greater London, where the average price is £359,476.

While not totally insulated from knocks and shocks — prices dipped in the immediate aftermath of the banking collapse four years ago — history shows that central London always bounces back strongly. Since the Sixties, prices have roughly doubled every eight years.

Values are now 13.5 per cent above the previous peak in March 2008, according to research by Knight Frank, and the market is forging ahead in areas ringing the gold-plated inner core of Knightsbridge, Belgravia and Mayfair.

Aerial view of Mayfair
© Rex Features
The property market is forging ahead in areas surrounding gold-plated Mayfair
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Check area stats for Mayfair
See current property values in Mayfair

Central London, broadly districts within travel Zone 1 - which is roughly the car congestion charge zone - is alive with change and regeneration, creating fresh buying opportunities for people who want to live in the thick of it.

“London has become more like Paris, Barcelona and downtown Manhattan where people enjoy the buzz of a busy district on their doorstep,” says Mike Bickerton of property consultant DTZ.

Residential revamp


King’s Cross and London Bridge are becoming new business areas, which in turn create a local residential market. “Midtown”, the area between the West End and City, is experiencing its biggest change in 50 years with redevelopment of outdated commercial buildings and workshops. The Square Mile, once a dull nine-to-five office district, has an animated evening economy and needs more homes.

Victoria and the bordering Westminster parliamentary quarter, for decades a forgotten address, is swinging into fashion. Marylebone, Fitzrovia and Bloomsbury continue to be revitalised by independent retailers, restaurants and galleries.

The view from on of the award-winning new homes at Crabtree Place, Fitzrovia
Guide price £2.795 million: award-winning new homes at Crabtree Place, Fitzrovia (020 7580 1010)
Parts of Theatreland, including grubby Soho backstreets, are getting a facelift. Homes are sprouting up alongside West End department stores and shops. Upper-crust St James’s is getting dozens more homes as the Crown Estate sees the benefits of these revitalised areas. Riverside regeneration is under way at Nine Elms and Vauxhall - both hot spots in the making.

Crossrail cuts through much of this territory and is proving a catalyst for more investment, especially around the new stations being built at Tottenham Court Road and Farringdon.

You do not have to be a big-budget buyer to break into this market. Yes, it’s true that the so-called “super-prime” addresses (Mayfair, Belgravia, Knightsbridge) cost £3,000-plus per square foot, but values across the wider central London zone range from about £700 a square foot (in Waterloo), and the average is about £1,200.

“Buying in the centre is not just a sound investment, it beats commuting and you have all your needs on the doorstep,” says Paul Smith, 42, who has moved back into his South Molton Street apartment, a 960sq ft two-bedroom penthouse, after renting it out for a period.

He has built up a £12 million portfolio of 14 central London properties since his first purchase in Kennington in 2006, and recently has been targeting Westminster and Victoria, where new-build values have jumped 30 per cent in two years.

Flats at St Pancras Chambers, the remodelling of the famous station
£849,950: one-bedroom flats at St Pancras Chambers, the remodelling of the famous station (020 7580 1010)
“People may think they’ve missed the boat, but that’s not the case. If I were starting out now I would still opt for these less expensive areas of central London and avoid traditional addresses such as Mayfair and South Kensington.

“I always buy apartments that I would like to live in myself, and often I do end up living in them. It’s about lifestyle as much as investment.”

Investor gold rush


London Central Portfolio (LCP), a fund management company that pools investors’ money to buy homes in the Royal Borough of Kensington & Chelsea and the City of Westminster, says these properties have a track record at least as good as gold, which is considered the ultimate “safe haven” asset.

Property prices have increased by 482 per cent since 1995, based on Land Registry figures, while gold has risen by 468 per cent. Since 1970, central London prices have increased 10.6 per cent per annum, or over 50 times.

Naomi Heaton, LCP managing director, says central London has unique appeal for many buyers, but the biggest factor underpinning price rises is scarcity of supply. Her company focuses on six square miles centred around Hyde Park. Only about 500 homes a year are developed there.

A flat at 21 Brook Street, a development at the top of a period Mayfair building
From £3 million: 21 Brook Street is a development of two flats at the top of a period Mayfair building (020 7499 1012)
“Canary Wharf may be an important business hub but there is an extensive oversupply of homes and prices are one third of those in the heart of the capital.”

Depending on the exact location, West End properties can be cheaper than homes in central London’s more established residential neighbourhoods, with prices starting below £500,000 according to LDG, a Marylebone estate agent.

Bang in the bull’s-eye


Verge Mayfair is a scheme of 10 apartments carved from a former office block where Oxford Street meets New Bond Street. Instead of opting for simple crash pads for bachelor bankers, developer Oakmayne Bespoke went for exquisitely designed loft-style apartments for fashion-loving buyers.

A discreet entrance on Dering Street opens on to a wide, catwalk-like reception foyer with marble flooring. The homes have high ceilings, Milan-style contemporary interior design and range up to 1,873sq ft in size. Prices from £950,000. Call Knight Frank on 020 7861 5489.

At 21 Brook Street in Mayfair, two apartments (1,453sq ft and 2,164sq ft) have been created at the top of a period building. Prices from £3 million. Call 020 7499 1012.

Verge Mayfair has 10 apartments in a former office block where Oxford Street meets New Bond Street
From £950,000: Verge Mayfair has 10 apartments in a former office block where Oxford Street meets New Bond Street (020 7861 5489)
Even touristy Trafalgar Square has got its first residential development — five apartments in the former Canadian Pacific building. Prices from £5.5 million. Call 020 7235 4555 or visit trafalgarone.co.uk

This appears expensive for a novice residential address but the immediate area is poised for an upgrade. Crown Estate is targeting scruffier side streets either side of Haymarket, currently dominated by souvenir shops and chain restaurants. This facelift aims to attract upmarket retailers and create above-shop apartments.

Neighbouring Soho, where the sex shops that once dominated are giving way to boutiques, is cheaper. Hat Factory brings much-in-demand loft apartments. Tucked away behind Carnaby Street, the handsome listed Victorian former factory is being split into seven two- and three-bedroom apartments, with fabulous open-plan interiors and vaulted ceilings. Prices from £925,000. Call Jones Lang LaSalle on 020 7993 7395.

In Victoria and Westminster, developers are pushing up values in line with the area’s rising status, demanding up to £1,600 per square foot for top new apartments, but the going rate remains about £1,000 to £1,200 per square foot — lower than many buyers expect.

Victoria lies on the more affluent west side of London and borders posh Belgravia, where values are up to three times more. Insiders predict a narrowing of the gap. Berkeley Homes has snapped up former ministry buildings close to the Houses of Parliament. These schemes are launching in the autumn. To register, visit abellandcleland.co.uk or call 020 7861 5443.

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