Research by the capital’s top estate agents shows that prime central London prices have jumped 48.4 per cent since the low point of March 2009. With values at a record high, even moderately rich buyers are finding they cannot afford to live in the best postcodes. So they are searching for better-value areas where they can get more (sometimes much more) for their money.
This has triggered a domino effect: the influx of new buyers to an area is driving up prices beyond the previous level, while sellers are seizing the opportunity to pocket a profit and invest in another up-and-coming area.
Equity coming out of prime central London is finding its way to neighbouring central districts such as Primrose Hill and inner suburbs such as Wimbledon.
The hunt for more affordable locations is seeing Fulham residents crossing the river to put down roots in Battersea and Balham; others are moving from Parsons Green to Putney, from Hammersmith to Shepherd’s Bush and from Clapham to Dulwich.
There is a knock-on lower down the market too, with second-time buyers selling flats to purchase houses in up-and-coming areas such as Brockley.
Experts say the traditional ripple effect of strong demand spilling over to neighbouring areas and resulting in proportionate price increases is more pronounced than in the past because of the sheer weight of money emanating from central London. “We now get a lot of buyers moving from Chelsea,” says Robin Chatwin of Savills in Wandsworth. “Often they start off looking in Battersea and then take a step slightly further to Wandsworth or Clapham, where you can get even more square feet for your money.
“A typical 2,000sq ft home in Chelsea would be in the region of £4 million whereas in Wandsworth it is about £1.5 million. The same applies to flats, which are roughly half the price.”
Fulham’s relative cheapness (£850-£1,000 a square foot) is attracting Kensington and Chelsea movers, who also make up 20 per cent of buyers at Battersea’s riverside developments such as Imperial Wharf and Albion Wharf, according to Knight Frank.
While a value map of London shows prices exceed £4,000 a square foot for the best central addresses, under £2,000 is more typical for prime, as opposed to so-called “super-prime” properties. And the average price across the wider central London area (which would include Pimlico and Paddington, Earl’s Court and the South Bank) is nearer £1,200 a square foot.
Studying square foot values is a good way of identifying hotspots and also more affordable “opportunity areas”. Buyers can see whether a high price tag is justified by a home’s spaciousness, or if a small property carries an inflated price for its grand postcode. There are some striking differences in values between central London areas. Streets in prime Chelsea can be four times more expensive than charming Georgian terraces in Kennington, which is inside the parliamentary Division Bell area.
Buyers who cherry-pick lower-priced areas with potential can profit handsomely. Neighbourhoods can quickly swing into fashion.
Research by property consultant CBRE shows that over the past five years the £1,000 a square foot price point has rippled out from the SW1, SW3 and W1 postcodes to reach Hammersmith in the west, Lambeth in the south, Swiss Cottage in the north and Aldgate in the east.
© Jones Lang Lasalle
The new top 10
Twenty years ago there were only four addresses — Mayfair, Knightsbridge, Belgravia and St James’s — in a premier division of property compiled by Savills. Today there are 10, with Holland Park, Notting Hill, The Boltons, Chelsea (SW3), Regent’s Park and Kensington.
Primrose Hill, Marylebone, Dulwich, Blackheath and Canary Wharf have moved up the scale in great strides, going from fifth to first division. Spitalfields and King’s Cross have been big movers, too. And St John’s Wood has raced ahead of Hampstead.
Good-buy areas in zones 1 and 2
Knight Frank tips south bank riverside districts to jump in price during the next five to 10 years. “Nine Elms to Vauxhall Cross will change out of all recognition, while the extension of Tate Modern, due for completion in 2014, will see Bankside values rising even higher,” says the firm’s Matthew Smith.
Certain locations in travel Zones 1 and 2 stand out as comparatively good value in spite of general price hikes over the years. Westminster’s parliamentary quarter (about £1,300 a square foot) is one of the best-value places in the congestion charge zone. Elephant & Castle is the only travel Zone 1 area where you can buy brand-new for less than £600 a square foot.
Telegraph Hill, on the Brockley/New Cross border, is a Victorian conservation area with two refurbished parks, a church, community centre, café and a highly rated state secondary school — Haberdashers’ Aske’s Hatcham College. A semaphore signalling station once stood at the summit of the hill, from where there are amazing views of London.
Local estate agents’ claims that the area is “undervalued” ring true. The neighbourhood has six-minute rail links to London Bridge and is on the East London line. Developer St James has built nine traditional-style houses on a former reservoir at the top of the slope. With up to 2,254sq ft of space, the homes each have gated off-street parking, a garden and rear terrace. Separate access to the ground-floor living area means the space can be used as a self-contained flat. Called St Catherine’s Place, prices start at £975,000. Call 020 3326 1550.