Super-rich buyers spent almost £3bn on luxury properties in London last year that became their “third or fourth” homes and “trophy assets”, property experts have said.
Political uncertainty in the US and Hong Kong, as well as a weak pound, were other key factors that enabled the mega-wealthy from both overseas and within the UK to splurge even as hundreds of thousands of Londoners risked being “plunged into poverty” as a result of the coronavirus pandemic.
The UK capital sold 201 “super-prime” residential homes – defined as costing more than US$10m (£7.3m) – in 2020, easily beating its traditional rivals of Hong Kong, which had 169 sales, and New York, which had 117 sales, according to recent figures by the estate agent Knight Frank.
They also show London leading in the “ultra-prime” market, with 31 sales. Ultra-prime sales involve homes worth above US$25m (£18.2m).
With the economic hardship inflicted by coronavirus as well as the “tsunami” of homelessness expected to impact Londoners for years to come, the gap between the haves and the have-nots has never felt more stark. “If you’re in certain industries such as hospitality or travel, then this pandemic has been absolutely devastating,” said Caspar Harvard-Walls, a partner at Black Brick Property.
“But for the very-rich, they’re looking at the London housing market as a time to make really good investments to widen their portfolios. We’re seeing a lot more buyers who are not just looking to buy a single house for £10m but instead spending £10m on a block of flats with multiple units to rent out.”
Despite the stalling of the housing market during the first lockdown, super-prime transactions in London actually increased by 3% in 2020 compared to the previous year, while sales in Hong Kong and New York fell by 27% and 48%.
A third of those sales were from UK domestic buyers, up from 12% in 2019. The housing market in Britain has seen an unprecedented amount of activity in recent months: more sales were agreed on budget day (March 3, 2020) than any other day in the past 10 years, according to the property website Rightmove.
But as first-time buyers and families scramble to buy before the chancellor’s stamp duty holiday ends on June 30, experts say these ultra-expensive homes aren’t being sold to people looking to upgrade to a bigger garden or make the most out of the tax break.
“The current stamp duty saving is understandably having a far lower impact at this price threshold of the market,” says Marc von Grundherr, director of the London estate agent Benham and Reeves.
For domestic buyers at this level, the capital’s super-prime homes are seen as “very much trophy assets for their portfolios”. “One buyer from as far as north as Manchester recently invested in a super-prime unit in Grosvenor Square as a second home, while also looking at six additional units in another development at £3m plus,” he told HuffPost UK.
“He’s doing so as he recently sold his business and wants to redeploy capital and recognises the benefit of doing so via the London real estate market. This is the case more often than not, with buyers snapping up homes in London’s most prestigious neighbourhoods as second, third and even fourth homes.”
For some super-rich Britons, investing in London’s most prestigious postcodes has reached near frenzy. “We’ve got clients clamouring around looking at properties from £5m up to about £50m in central London like Belgravia, Knightsbridge, Chelsea, Holland Park and Notting Hill,” boutique estate agent Robert Bailey told HuffPost UK. “Some of the prices that are being paid are just absolutely astronomic.”
Several estate agents said swimming pools were among the key factors in purchases of super-prime homes in 2020. “Planning laws have changed a lot,” said luxury estate agent James Nightingall. “You can’t build down to make a pool in Chelsea when 10 years ago you could, so if you want a pool then you have to buy a new place that has one already.”
International travel restrictions that have been in place across different parts of the world have done little to deter foreign buyers interested in spending big on the UK housing market.
“There was a dip in sales from people who wanted to see properties in person, but there was a real surge once travel eased [in early summer 2020],” said Harvard-Walls. “There’s a lot of advantage for overseas buyers with the pound being relatively weak.”
Bailey said he was initially “very worried” about how the pandemic would impact the high-end property market when the first national lockdown was announced, but business soon picked up. “We’ve had a lot of Americans and French buyers. I think they’re taking advantage of the weaker pound and the fact that exchange rates are quite favourable.”
The Knight Frank figures show the highest number of super-prime sales took place in March, just before the first national lockdown, and in December. This end of year jump could be as a result of the US election in November, Harvard-Walls added. “There was a lot of political certainty during that time, with clients thinking there could be quite significant tax increases if Biden won.”
The political turmoil in Hong Kong and the expected exodus of hundreds of thousands of British National (Overseas) passport holders to the UK may have also contributed to the bump in London super-prime sales – and the 27% drop in sales in the former British colony.
“Hong Kong residents have been putting plans into place to enable them to move to London or the rest of the UK in case the political situation worsens,” said Harvard-Wells.
One such buyer is Yvonne,* 43, who purchased a five-bedroom house in South Kensington in December. She and her husband are BNO passport holders and recently moved to the UK with their two young children. The couple, who both work in finance, paid “about £7m, maybe a little more” for their new home.
“Many of our friends in Hong Kong have recently bought places in London,” Yvonne told HuffPost UK. “There’s a general sense that if you can afford it then you should jump at the chance to get out while you can. We’re all scared of what will happen and many of us have already lived in the UK before, so it just made sense.”
Critics have called the new national security law in Hong Kong “the end” for the territory, while China says it is necessary to bring stability and protect it from foreign interference. For Yvonne, it was the final straw. “People are being arrested, many of them young students, and this is just the beginning. How can I raise my children when I’m worried that they could end up being punished for expressing anti-government opinions?”
Britain, of course, has been trying to pass its own anti-protest law, with “kill the bill” demonstrations against the Police, Crime, Sentencing and Courts Bill in recent weeks being repeatedly met with police violence.
Despite the eye-watering price, Yvonne sees her new London home as an investment. “We did pay a lot, but it was not even close to what we would have paid for a similar-sized house back in Hong Kong. Yes, the house is a luxury but for us, moving wasn’t – it was necessary.”
European buyers have also more prevalent due to the relative ease with which they could reach the city last year. “We’ve had the shadow of Brexit hanging over us between 2015 and Christmas [2019],” said Harvard-Walls.
“But by the beginning of 2020, a lot of uncertainty over tax changes had gone once the Conservatives had won the election with a huge majority. Once the prospects of a Corbyn government were gone and we did actually leave the EU, I think international buyers saw those issues as being resolved.”
* Name has been changed