Prime homes drive housing and economy

Date: 
Thu, 24/07/2014

Westminster City Council has today published a response to an independent report into the prime residential property market in central London.

The report, released this morning, provides the first detailed analysis of London’s ‘prime and super prime’ residential market – and the impacts it has on housing in the capital.

The key findings are:

  • between 2003-2012 there were 3,335 sales of property valued at more than £2 million in Westminster – 8% of the total number of transactions, but accounting for more than 40% of value
  • the evidence suggests that the great majority of this small proportion are either occupied by the owners or rented London workers
  • Westminster on its own yields more Stamp Duty Land Tax (SDLT) than 29 of the largest local authorities in the UK combined (£348 million in 2012-13)
  • owners of properties worth more than £15 million spend around £4.5 million each in London annually and those owners in the £5-£15 million range spend around £2.75 million
  • owners of properties in the £5 to £15 million price band and of properties above £15 million, together contribute at least £2.3 billion a year to the London and the wider economy
  • over the past four years, sales of homes more than £2 million have averaged 450 in Westminster, annual stock turnover in Westminster ranges between 2,700 to 6,000 units – so homes of more than £2 million account for between 8% and 17%
  • the evidence suggests that prime residential property transactions differ from others. While the number of prime transactions track “global” indicators like the price of gold, prime prices have remained relatively stable (while average house prices have seen significant increases). This suggests that properties worth more than £2 million are seen as stores of value more than as a speculative opportunity

Ramidus Consulting Ltd were commissioned by the council to undertake a piece of research into the residential market in Westminster. This was primarily to understand the extent and implications of the issue to help inform strategic planning and housing policy as part of the evidence base for the current revision of the City Plan and Housing Strategy. In particular, the consultants were asked to ascertain: 

  • what is the nature of the prime/super-prime market in Westminster?
  • how has it changed over time and what does the future hold?
  • to what degree is this a characteristic of other global cites such as New York, Paris, Tokyo and Hong Kong and, if so, to what extent and what (if anything) could be learnt from their approach? 
  • What are the drivers for prime/super-prime investment in Westminster?

The overarching conclusion from the report is that the prime sector of the market is a less significant driver of a number of trends in the market than is generally perceived. It also suggests that prime property and its owners make a significant positive contribution to London’s economy.

Also, the prime sector is not a major direct driver of the increase in London house prices as is sometimes asserted, nor are the number of prime homes a major factor in Westminster meeting its housing need.

This is the first time that the impacts of the prime residential market has been explored in this amount of detail, bringing together information from a wide range of sources and seeking to separate evidence from anecdote to provide a robust piece of research. It is probably the most authoritative account of the issues available at this moment in time.

Responding to the report, Councillor Robert Davis, Deputy Leader of Westminster City Council and Cabinet Member for the Built Environment, said: “This independent report strongly counters the perception that overseas investors are buying high value properties in London as an investment and then leaving them empty.

“In fact it shows that the prime residential market is an engine room within the UK economy, generating jobs and growth for London, and billions for the UK.

“Creating affordable housing is a priority for all local authorities – and top of the list for Westminster – but building affordable homes should not be done purely through public money that can be spent elsewhere. It is a simple fact that developments like One Hyde Park contribute millions to affordable housing projects and are an important cog in the overall housing mechanics of the capital.

“Housing in Westminster will always be a complex issue, because of our varied demographics and the high demand to live here. The data and conclusions drawn from this landmark piece of research will help us to formulate our City Plan and update our housing policies to help us tackle the key issues.”

Read the full 'Prime Residential Market in Westminster' report


Last updated: 10 August 2016
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