UK Property - Prime central London expands south of the River
Rising demand from affluent residents and the creation of London’s first contemporary urban quarter - factors which have meant that Knight Frank have revised the methodology the Prime Central London Residential Index to include Southbank.
For the first time since our mid 1990s expansion to include Notting Hill, we have accepted that another area of central London has a proven track record to justify inclusion in our Prime Central London Index.
Southbank, extends from County Hall and Westminster Bridge, and runs east in a tight zone towards Tower Bridge, encompassing Shad Thames and Butlers Wharf. Regeneration in the area has been led by cultural initiatives, with a critical mass of projects building on the original Royal Festival Hall and National Theatre developments and which now includes the rejuvenated Borough Market, Globe Theatre and most significantly Tate Modern.
Residential developments have followed over time, with significant examples including: Benbow House, Bankside Lofts, Winchester Wharf and Whitehouse Apartments.
Central London has seen considerable price growth over the past 12 months. The Knight Frank Prime Central London index reveals that prices grew by 36.5% in the year to September 2007. The rate of growth has slowed with 1.2% growth during September; the slowest monthly growth recorded since August 2006.
Over the 12 months to September 2007 prices in Southbank rose by 17.3%, strong growth but well below the level experienced by locations like Belgravia or Knightsbridge.
Why has growth been lower south of the river? Southbank is an evolving market, but it has already experienced a period of speculation between the late 1990s and early 2000s, when an initial tranche of schemes came forward and the limited existing housing stock was sold out to investors and new occupants. During this period the differential in pricing between Southbank and the rest of central London fell significantly.
Over the past 12 months we have seen the more established markets of Belgravia, Chelsea and Knightsbridge race ahead with price growth being led by super rich domestic and international buyers. To date there has been a lack of really high quality stock available for purchasers on the Southbank and for this reason price growth has been more subdued during the recent period of super-rich purchase activity.
However we have seen evidence from some of the better schemes in Southbank, for example Bankside Lofts on Hopton Street, that where good quality stock has been offered - strong price performance is the result, with annualised growth of close to 25% for units in these developments.
Bankside – the emerging super-prime location
Within Southbank there are smaller micro-markets, an example being the more established Shad Thames area. In terms of future markets we believe that the area around Tate Modern will be the super-prime Southbank location. This is the location where top pricing will emerge and which will compete head on with established markets in West London.
There is a combination of factors which make us positive about this location. Tate Modern is arguably the world’s leading contemporary cultural facility, and provides the area with international recognition, which will only improve following the completion of the planned Herzog & de Meuron extension. The Millennium Bridge provides quick access into the City, which together with a river view provides a backdrop to the area.
One of the clearest trends in recent years in the prime central London market has been the ability of developers to push pricing significantly higher for modern developments – often ahead of the established homes market – especially lateral apartments. Central London is rich in period properties but relatively poor compared to New York and other prime cities, in the supply of high quality and well designed apartments. The Southbank, and Bankside in particular, offers the scope for more development of this type in the future - with several significant schemes in planning or awaiting commencement. The consolidation of this market over the next few years will see the emergence of an urban quarter which will feel very different from the more traditional neighbourhoods of west London.
At the moment pricing in Southbank for new developments ranges from £600 to £1,100 psf. This compares to figures double or even triple this level in the established prime markets to the west of London. Our view is that over the short to medium term this area will substantially outperform central London in terms of pricing growth.
Courtesy: Knight Frank Residential Research