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England’s Prime Property Hotspots December 2018 Investec Private Banking - Prime property CONTENTS 3 Foreword 4 New-build: ready for prime time? 6 Seeking prime: follow the cranes 8 Prime hotspots: now and next 10 Mortgages: what would Beyoncé do? 12 Amenities: Defining Prime New prime: the local halo Prime property means different things to different people and in different corners of the UK. Our 14 Going green: a property sale as ‘prime’ if it exceedsquantitative £1million. research We’ve defines also Why rural is all the rage relied on our survey data, which asked respondents what qualities would make a property prime to inform our research. 2 Investec Private Banking - Prime property FOREWORD Welcome to our prime property outlook Where’s the next prime property hotspot? Where’s around Brexit, tax changes and more – have largely the smart money moving, in London and across been priced into the market at this point. England? And how are attitudes changing among today’s buyers? Whether you’re looking for new-build opportunities, want to spot the drivers of the property market At Investec, we wanted to answer these questions. or just want to scope out the next hotspot, We surveyed 500 high-net-worth individuals the insights in this report should give you firm (HNWIs) and combined the findings with Land foundations for making that all-important property Registry data to understand the trends reshaping decision. the sector. We wanted to know what today’s buyers think about prime property, the trends RESEARCH SNAPSHOT driving the market and – given the importance of Our report is built on feedback from 500 HNWIs, ‘location, location, location’ – where the hotspots data from independent sources and insights from are now… and in the future. our property team. Here’s what we’ve found: • New-build is starting to redefine prime A standout from our research is how important property. Fresh developments are creating new prime new-builds have become. This is partly prime locations in London, in particular (see p4). driven by up-scale developments across the • Infrastructure is crucial to this trend. Great country. But we’re also seeing a change in the transport, communications and civic amenities are features that buyers are looking for. Larger living key factors that make a property ‘prime’ (see p12). spaces, energy efficiency and faster broadband are • Provincial cities such as Cambridge have all helping the case for prime new-build. benefited from new transport links and the presence of growth industries. This trend is also London remains a special place for buyers. It’s boosting parts of the North and Midlands (see p5). still at the centre of the financial world and there • We’re seeing greater regeneration in outer remains a big undersupply of property throughout London areas with available land, such as the capital. Downside risks to prime property – a Waltham Forest, Newham and Havering (see p7). softer market over the past two years, uncertainty • Gentrification of inner London is a big factor, driven by a desire for upmarket property in trendier areas, particularly by younger HNWIs (see p4). • We’re seeing renewed interest in more rural DEFINING PRIME locations as connective infrastructure is upgraded and new ‘garden village’ projects come to market Prime property means different things to different people in different parts of England. Our quantitative (see p14). research defines a sale as ‘prime’ if it exceeds £1 million – a modest sum in London, but more generous elsewhere. Then our survey data refines the qualities that make a property ‘prime’ to inform our insights. Ryan Tholet Head of Investec Private Bank 3 Investec Private Banking - Prime property NEW-BUILD Ready for prime time? In sought-after locations, developers are aggressively marketing prime new-builds as both desirable living and top-notch investment. Buying off-plan might be riskier for some – and with the changing profile of international buyers, the market is hard to predict. So what is it about new developments that tell us the trend has stamina? Until a few years ago ‘prime property hotspots’ NEW-BUILD SUPPLY AND DEMAND referred strictly to postcodes in Kensington & But it’s in these less traditional boroughs that Chelsea, Mayfair, Belgravia and Knightsbridge. upmarket new-build is having its biggest influence. Now, affordability and demand – coupled The areas where new-build represents more than with high-profile new developments – have half of prime sales include Tower Hamlets (see box) created ‘outer prime’ areas in some previously and Newham – areas with older, higher-density real unfashionable locations. estate, where modern buildings really stand out. True, the big money in London is still highly One reason investors and home-buyers are concentrated in the traditional areas. Westminster looking outside the more well-heeled areas is that and Kensington & Chelsea together saw £8.2 many prime new-builds in the traditional hot-spots billion in prime sales last year – the other 31 are struggling to sell – and have been for some boroughs combined sat at £13.4 billion. time as the Brexit uncertainties mean international Interestingly though, if we only look at locations buyers dry up. That’s pushing many developers in London with more than one hundred £1 million- into aggressive sales – with as many as 40% of plus sales (our lower limit to classify a property as London new-build sales going to ‘bulk buyers’, ‘prime’ in the capital), the biggest sales growth according to a Financial Times investigation. was Lewisham, where values soared nearly 50%. The volume of new-build luxury apartments going In prime-lite locations the figures get much bigger. up in parts of the capital remains much-discussed. Waltham Forest, for example, saw prime sales There is a chance that in some developments, rocket 165% in 2017; Newham was up 143% and prices will come down as developers look to Havering 61%. These aren’t locations you might crystallise cash. That said, buyers on the sidelines think of as ‘prime’ – and five years ago, high-value looking for developers to slash prices ahead of sales in these locations were negligible. Brexit might be in for a long wait. 4 Investec Private Banking - Prime property THE HUNT FOR PRIME VALUE Make no mistake: our forecasts suggest the THE REGENERATION GAME prestige postcodes will continue to lead the prime In traditional prime improved last year when property rankings. But the best value new-build locations, developers can Cambridge North station could well be found in those up-and-coming struggle to find green- opened – combined with areas. That’s also why the new-build story is so or brown-field sites to its tech industry and latent build properties with the demand from senior staff interesting outside London, where emerging prime features and contemporary members at the university hot-spots combine with more readily available land designs many HNWI has kept the property homeowners want. But market buoyant. and evolving infrastructure to offer real value. when new transport links, Smaller luxury builds In Cambridge for example (see box), high regeneration schemes, are springing up around demand and low supply, combined with a fast- changing demographics Addenbrookes Road, or business opportunities meeting growing demand growing high-tech workforce, are transforming boost the appeal of an as facilities such as prime property offerings. area, luxury new-build can Cambridge Science Park flourish. Here are three draw in more high-tech North of London, developers are getting creative examples of that trend: employers. Plans are also to accommodate Green Belt restrictions. In South afoot for five new garden Bucks, for example, new-builds made up 20% of TOWER HAMLETS towns between Cambridge This diverse borough and Oxford supported by prime property sales, rising to 41% in Broxbourne, stretches from the Tower new rail and road links. Hertfordshire, as buyers eye its Crossrail 2 of London to Canning Town, and the Stratford terminus due to open in 2033. border to Canary Wharf. Greater Manchester prime sales were up 22% So it’s no stranger to in 2017, to nearly £230 million, driven in part upmarket property sales: 258 prime deals totalled by the Northern Powerhouse initiative. In that £344 million in 2017; and city, many developments – like those around St 60% of prime sales were new-builds last year. TYNE & WEAR John’s Deansgate and Salford Quays – are already Look outside Docklands Ranked by The Sunday designated ‘prime’. for really attractive new- Times as one of the best Overall, new-build in 2017 represented £5 builds. There are big places to live in the UK, plans for Brick Lane and Tynemouth boosted the billion-worth of prime sales in England and Wales – Petticoat Lane, a £100 area’s prime market by 16% of the total market. But these developments million redevelopment of 10% last year, 20% of the Old Royal London which was new-builds. delivered a third of the year-on-year growth in the Hospital by 2021 and a High-end residential prime market – an extra £602 million. £350 million scheme at developments in Tyne & Our research shows that outside the South East, Ailsa Wharf. The whole Wear come to market at Poplar Riverside area is exceptional value. Bespoke HNWIs see Bath, Cambridge, Oxford, Manchester ripe for regeneration. projects in village locations and Cheltenham as property hot spots – and around Newcastle, Gateshead and Whitley prime new-build opportunities in these cities Bay will typically deliver remain highly sought after. When it comes to large homes below the the properties themselves, size, unique features £500,000 mark, despite including the high specs and great transport links are considered the key and generous living space attributes for ‘prime’.

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