London is renowned globally as a destination for property investors.
A third (33%) of high-net-worth individuals (HNWIs) from the Gulf Cooperation Council (GCC) region invested in London property last year, according to Al Rayan Bank — more than any other major global market.
Typically, HNWIs gravitate towards the heartland of the prime central London (PCL) market when seeking a property investment, encompassing boroughs such as the City of London, Kensington & Chelsea and the City of Westminster. This is hardly a surprise; these areas are known for their luxurious buildings, not to mention their historical significance, green spaces, great schools and cultural vibrancy.
From an investment point of view, these areas are still located in central London, which means they still enjoy many of the same benefits
But our understanding of the prime property market is shifting, and brokers working with HNWIs will need to take note of buyers’ evolving preferences.
There are areas of central London, outside what we typically consider to be PCL, that are increasingly experiencing high demand from investors and wealthy buyers, including Camden, Notting Hill, Shoreditch and South Bank. It is worth considering what is driving demand in these neighbourhoods, and what the implications may be for lenders and brokers.
Generational shift
First, notable urban regeneration projects have taken place in these London enclaves over recent years. This has boosted their desirability, as well as increased the number of properties available, while each has maintained its unique character and charm.
Consequently, we have seen a generational shift as young, affluent buyers opt for these less traditionally desirable areas of the city. Those who have spent time in these parts of London will appreciate why: the cultural, culinary and entertainment options are growing significantly.
Brokers representing HNW buyers must take note, understanding that their clients may well explore less traditional hotspots around the capital
Meanwhile, with a mix of historical, post-industrial and contemporary architecture, there is a wide variety of property in which the new generation can invest.
Finally, from an investment point of view, these areas are still located in central London, which means they still enjoy many of the same benefits that the traditional postcodes of the PCL market do. Indeed, owing to their location, prestige, quality and demand among domestic and international buyers, they have similar potential for capital growth and resilience.
For homebuyers and investors, both domestic and international, these non-traditional PCL areas contain a wealth of opportunities, with data showing that they have outperformed the rest of the UK in recent years.
Notting Hill is one of London’s most desirable areas. With colourful houses, a famous market and celebrity residents, its property values have experienced a huge increase, of 101%, in the past 10 years, according to data from Kinleigh Folkard and Hayward, rising by 11% in 2023 alone — this at a time when average UK prices have been in decline.
With a mix of historical, post-industrial and contemporary architecture, there is a wide variety of property in which the new generation can invest
Shoreditch has enjoyed arguably the most significant transformation in the past decade. One in 10 properties exchanges for over £1m, while overall average prices have risen from £1.07m in 2013 to £1.38m in 2023.
Similar trends can be seen in the rental market in Camden and Kentish Town. JLL reports that, between 2011 and 2021, rental prices for flats rose by 19%, with house rental prices rising by 9%. The firm also forecasts a 25% sales price growth and a 17.6% rental growth between 2022 and 2026, so the prospect of higher rental returns could provide more opportunities for investors.
Clearly, these less traditional areas are gaining popularity, and value, thanks to their location, amenities and character. They offer a different lifestyle from that of the traditional PCL areas, appealing to a typically younger demographic while still carrying the potential to deliver strong investment returns.
Our understanding of the prime property market is shifting
Are these areas challenging PCL postcodes? Or do we need to redefine ‘PCL’? I do not think so.
The distinct, singular features of luxury properties in PCL postcodes restrict direct comparisons. The likes of houses in Kensington & Chelsea have been sought after for centuries, long representing the top echelon of the property market, not just in the UK but globally.
This enduring appeal of the PCL heartland is not being challenged by up-and-coming boroughs such as Notting Hill or Shoreditch. But brokers representing HNW buyers must take note, nonetheless, understanding that their clients may well explore less traditional hotspots around the capital.
Alpa Bhakta is chief executive of Butterfield Mortgages
This article featured in the April 2024 edition of MS.
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