Resilience reigns for Prime Central London residential
The enduring resilience of Prime Central London (PCL) residential property shows no signs of abating this year as wealthy domestic and international buyers continue to be drawn to this asset class attracted by its ‘safe haven’ status.
According to a recent report from Savills, PCL property is projected to be the strongest performing residential market in 2024 and is predicted to see capital growth of 18.6% over the next five years.
This projected capital growth, alongside increasing rental values means that high-net-worth investors are increasingly drawn to this market and are actively seeking opportunities to put their capital to work.
At Mera IM we remain long-term advocates of the PCL market based on a range of factors but supported by two key fundamentals: the limited supply of prime central London properties and the high levels of demand for the right locations.
The PCL market has remained robust throughout the recent market turbulence which resulted from the successive sharp increases in base rate.
This is due to the predominance of cash buyers within this market and is therefore less affected by the increased borrowing costs.
The limited and aging stock within this market is currently experiencing a wave of refurbishments within the key ‘golden postcodes’.
These properties have shown a remarkable ability to hold their value over time, making them a reliable choice for investors and lenders alike and we are increasingly being approached with these opportunities.
With inflation seemingly coming back under control – geopolitical events notwithstanding – and signs of interest rates cooling, investor confidence is likely to return to fuel further demand in the PCL market.
Meanwhile, the city’s enduring reputation as a global financial hub, coupled with its cultural and educational offerings, makes it an attractive destination for both domestic and international high-net-worth individuals.
Based on these factors, PCL is predicted to outperform most other UK residential markets over the next 5 years and transaction volumes are predicted to remain high.
Global wealth generation is a key driver affecting the level of demand with the core buyers being predominantly ultra-high net worth individuals (UHNWIs).
A recent report by UBS stated that the number of UHNWIs is expected to rise by 53% over the next 5 years which will further expand the buyer base and levels of demand for PCL properties.
As real estate finance providers, we consider PCL residential refurbishments to be an excellent lending opportunity and will be looking to deploy significant capital into this sector in 2024.
James Fenwick is a Structured Finance Analyst at boutique real estate lender, Mera Investment Management (“Mera”). A specialist in real estate finance strategy and funding solutions, he is responsible for managing and monitoring a portfolio of real estate loans and Preferred Equity investments, as well as the origination, underwriting and execution of new deals