January 2025
Dear Reader,
As we continue into the New Year it would be understandable to feel somewhat downtrodden about circumstances. Since 2016, successive governments and party leaders have produced political instability and made fiscal decisions that have put increasing pressure on the Prime London property market and the wealthy in general. We now stand in a moment of further uncertainty, with the current Government’s business, non-domicile and agricultural policies serving to cause many to question their country of residency. Globally, the backdrop of regional conflict remains, Eastern powers continue to strengthen in relative terms, fundamental changes to working and living habits continue to impact real estate markets, and the dawn of AI represents a further unknown.
However, as with all shifts in the zeitgeist, within the strife there is opportunity. To understand this we must stand back and take a realistic look at the fundamentals. London retains one of the most robust legal systems in the world for protection and preservation of private property. This is backed up by a world-class financial services system that is the world's largest centre for cross-border banking, second-largest exporter of financial services and second-largest legal services market. Furthermore, whilst there have been recent groans about the scale and trajectory of the UK capital markets and public listings, the UK is the second largest destination for FinTech investment in the world. Revolut, the fast growing Neo-Bank now valued at $45 billion, chose London as its headquarters over the US due to a favourable regulatory environment.
So how do these fundamentals pair with the world of today? As the US welcomes President Trump for a second time, it is possible that the UK private credit market stands to benefit from his pro-business agenda given that many alternative lenders are funded by capital from the US. Private Credit in general is a market that globally continues to boom, as illustrated by recent news of Goldman Sachs deepening its exposure to this burgeoning market. This comes on the back of City and Apollo’s joint $25 Billion Private Credit Program announced towards the end of last year. We therefore see no shortage of capital for real estate professionals looking to take advantage of any opportunities that may unfold. The potential for increased US activity in the UK is further enhanced by the USD/GBP trend which additionally could see an increase in direct investment into real estate, whether as homes in Prime London or via other commercially attractive asset classes across the UK.
Looking at the future of Prime London, it is clear that the aforementioned Government policy changes combined with technological shifts have led to some clients adopting a more nomadic lifestyle and a ‘helicopter’ approach to London. This will likely lead to the development of more diverse classes of real estate within Prime London to cater to this trend, such as an increase in the number of branded residences with full suites of services and luxury hotels (of which London already leads the way globally). We may see an increase in more novel ways of owning real estate, such as private residences clubs with fractional ownership models, with clients residing abroad still desiring hard assets such real estate as a cornerstone of their investment portfolio.
As expected and as has been seen decade after decade and through crisis after crisis, the Prime London market remains incredibly resilient. Transactions in 2024 were up 4.9% overall on 2023. Sales volumes for the whole year were 10.0% higher than the pre-pandemic annual average. The number of properties going under offer in December was 16.0% higher than the previous year, and 6.7% up on 2023. New instructions in December increased by 28.6% on an annual basis with the 2024 full year figure 10.5% up on 2023. Annual rental growth across Prime London increased to 2.5% in December, continuing the previous year’s trend of low, steady growth. Average rents were 31.9% above their 2017-2019 (pre-pandemic) average. Finally, the mark up on new build developments compared to second hand stock reaches as high as 50% in some locations due to chronic undersupply.
In closing, although the dynamics may evolve, we see the fundamentals of Prime London real estate underpinned by the founding stones of a mature market. Whilst there may be increasing interest in more nascent markets across the globe, these have not yet had sufficient time to prove themselves comparable to London in terms of market maturity. These markets remain more liable to boom and bust and state involvement compared to London’s stability and certainty of capital preservation across time.
We look forward to continuing to serve our clients through these uncertain times, as we have done for over 25 years, developing new relationships and collaborating on new opportunities.
Best Wishes,
Wayne Coleman
