The number of flats priced over the £1 million mark has grown by 196 per cent in a decade as developers realise “the only way is up” in central London.
Sales of £1 million-plus flats in England and Wales have trebled in the past decade as wealthy buyers opt for new-build luxury apartments in desirable central London locations.
Almost all (96 per cent) of the million-pound apartment sales recorded in England and Wales last year were in London, with more than half taking place in Kensington & Chelsea and Westminster, the capital’s two most expensive boroughs, according to the latest research by Lloyds Private Banking.
The increase in luxury flats takes place against a background of generally rising house prices in London: average property prices in the borough of Kensington & Chelsea rose 114 per cent in the decade to 2016 to £1,850,000; in Westminster the change was even more dramatic, with average prices rising 145 per cent to £1.4 million.
However, the study also found that the proportion of £1 million plus sold properties that were flats increased more than any other property type in the price bracket.
“A finite supply of land in prime central London combined with a growing population has meant the only way is up with more and more developers focusing on apartments,” says Louise Santaana, head of lending at Lloyds Private Banking.
“In the past decade there has been a large increase in the building of high-value apartments in Knightsbridge, West End, Victoria and King’s Cross, with Marylebone and Mayfair the top two locations for most development.”
HACKNEY: LONDON’S NEWEST £1-MILLION FLAT HOTSPOT
A surprise entry to the top 10 districts with the most million-pound flat sales is Hackney in north-east London, where the average house price in 2016 was £609,336.
The borough had no million-pound flat sales in 2006, but 47 sales were recorded in 2016 following a decade of steady regeneration and astronomical house price growth.
The rise of the £1 million flat has been led in part by London’s spiralling house prices, with flats in some popular locations now costing as much as a house in the same areas 10 years ago, according to Nicholas Shaw, of Harrods Estates in Kensington.
SAVING ON STAMP DUTY
The other major price hike, which has proved particularly off-putting to investors in the past five years, is the increase in property taxes, with stamp duty now at 12 per cent on any portion of a property sale above £1.5 million and an additional three per cent levy imposed on buy-to-let properties.
“Since the stamp duty increases in 2014, overseas investors in particular have been looking at properties around the £1 million mark because stamp duty is cheaper at that level,” says Shaw. “Chinese and Middle Eastern investors like to buy at this level because they save on stamp duty and it enables them to spread their risk a lot better.”
BUYING INTO THE LATERAL LIFESTYLE
The past decade has also seen increased appetite for luxury apartments from a broad spectrum of owner occupiers.
The number of EU nationals living and working in the UK almost trebled between 2006 and 2016, according to the ONS. “They tend to prefer apartments because they provide a much more European style of living,” says Simon Deen, director of new homes at Aston Chase.
“Downsizers want to buy lateral homes, people buying pied-a-terres are more comfortable buying apartments because they’re lock up and leave, even families are deciding that you get less wasted space in a flat than in a house.”