Between January and October this year, the number of such properties sold by international agent Knight Frank increased by a third compared to the same period last year and was 92% higher than in 2012.
This comes at a time when there is speculation over the sustainability of price growth in prime central London and the prospect of a mansion tax after next May’s general election, which have both resulted in more subdued demand.
However, a large contributing factor is that vendors, who are typically discretionary sellers, have lowered their asking prices by between 5% and 10% in order to achieve a sale, according to the firm.
‘Once buyers re-priced at a more realistic level and the gap between the expectations of the vendor and the buyer closed, it triggered a flurry of activity,’ said Tim Wright of Knight Frank’s Prime Central London team.
In June and July this year, Knight Frank sold as many £10 million plus properties as during the previous four months combined.
‘There has been talk of a drop in the number of transactions in the market and a slowing of price growth but this is due to the lack of data in the public domain,’ said Richard Cutt of Knight Frank’s Prime Central London team.
‘In the last quarter there have been a large number of flats bought from plan, off market, which have moved prices up and in some cases quite significantly. These sales only become public on completion and would paint a different picture of the market if they were factored in today. An example of this is the success of British Land’s Clarges Mayfair development,’ he added.
The higher number of transactions is also underpinned by strengthening demand in recent months, with Russian buyers re-emerging after a period of uncertainty and Chinese buyers increasingly active in the £10 million plus price bracket.
‘The Russians are back. After a period of uncertainty and instability, they appear to have more clarity on where they stand, which has given them the confidence to get back into the market,’ said Wright.
In the six months to October, Russian buyers accounted for 21% of super prime sales compared to 13% over the preceding six month period. However, given the economic backdrop in Russia, there is a marked difference between those that hold assets in roubles and those in US dollars, which is curbing the buying power of some.
This year also saw mainland Chinese buyers become active in the super-prime market for the first time, accounting for 3% of sales after negligible demand in previous years.
‘We are beginning to see some serious interest from ultra-high net worth mainland Chinese buyers. 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,’ explained Wright.
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. However, the sort of global geopolitical instability that drives capital into London and underpins demand will remain,’ added Cutt.
