London prime property hot spots shift as lifestyles are a changing

But working from home could be here to stay, and the home cinema could be about to take the place of the multi-plex in many people’s lives. This could make smaller properties less attractive.”

Outside of London, the South East was the most popular area for new mortgages for main homes, particularly Kingston upon Thames, Guildford and Oxford (KT, GU and OX postcodes).

Big boom in holiday homes

Lockdown has – understandably – seen a revival in interest in ‘staycations’ and more people looking to secure a home away from home to provide a change of scenery during lockdown. The biggest increase in purchases during 2020 was in holiday homes, which increased by 43% in 2020 compared with the year before.

“This shouldn’t be entirely surprising given international travel restrictions, and many buyers were spurred into action by the Stamp Duty holiday,” said Peter. “This probably encouraged a lot of people who had been thinking about buying a getaway to move now and take advantage of the discount.”

The most popular areas outside of London were the South East and South West of England, with Guildford and Tunbridge Wells proving popular in the former and West Cornwall and Gloucester in the latter.

Buyers not yet tired of London

Samuel Johnson famously said, “When a man is tired of London, he is tired of life, for there is in London all that life can afford.”

And despite media reporting on a mass exodus from the capital to the suburbs, Coutts data suggests that our clients still seem to agree with Dr Johnson.

• The majority of new deals in 2020 were against property in Greater London, albeit slightly down on the year before
• All lending deals on super prime properties (worth over £10m) in 2020 were in central London. All were houses, rather than flats or penthouses, and were primarily for main dwellings rather than second homes.  Most buyers were British, followed by South African, American and European (Germany and Netherlands in particular)
• The most popular areas for super prime deals are centred around Kensington & Notting Hill

“This bodes well for the future of the London property market,” says Peter. “The many attractions of the capital – including theatre and the arts, fine dining, job opportunities and excellent schools – remain a priority for our clients. As long as London can maintain its international reputation it will maintain its appeal.”

Prevailing conditions positive for property

As well as social changes, a favourable macroeconomic environment could see 2020’s momentum continue in 2021. Alan Higgins, Coutts Chief Investment Officer, points to three factors.

“Firstly, the uncertainty with respect to Brexit is largely in the past,” he says. “Secondly, we expect a V-shaped economic recovery as the vaccine distribution progresses. And thirdly, we should see the release of pent-up demand from buyers and sellers who put plans aside during lockdown.”

He adds, “In the meantime, low interest rates make financing cheap, and returns attractive compared to other assets for investors. We expect close to zero rates in the UK for the next few years at least. The Bank of England’s Monetary Policy Committee is likely to ignore any rise in inflation and focus on reflation, and this is the main positive factor for residential property.”

Tax changes to take their toll

However, the taxation regime will limit overall gains, especially for overseas buyers as they will have to pay an additional 2% in Stamp Duty from 1 April 2021.

Alan says, “Essentially, London and the UK has moved from a relatively low property taxation regime to one comparable with New York and Paris when you consider both the transaction tax and the annual ownership taxation levels.

“It’s also worth noting that the Stamp Duty holiday introduced by the Chancellor in 2020 will come to an end on 30 June. This will mainly affect the mainstream property market, but there is spill-over into the lower-priced end of prime property.

“The market will need time to adjust to these changes and we could see a softening in demand in the second quarter.”

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Source of data in the report: LonRes Q4 2020.