Two reports released separately by Savills and Knight-Frank (top real estate firms in the UK) in November, forecast that London’s Luxury property values were expected to increase, despite a recent slowdown in the overall UK Market. The Savills report forecast a 33% rise in London’s Prime property prices over the next 5 years vs. just 12% for the UK as a whole.  The report also indicated that market results would be better for grade A properties (owner occupied) vs. grade C (in need of tenants) and grade B (average homes/apartments). 

Why? Like in Manhattan, London’s Grade A houses in affluent areas like Chelsea, Kensington, Mayfair, Belgravia, Knightsbridge and the like, attract both Financial Sector buyers as well as cash-rich international prospects from Russia, Asia, the Middle East and Brazil (per Knight Frank).  Given that these buyers tend to be all-cash, their purchasing decisions are not affected by financing restrictions or employment concerns.  

It is striking how similar the story appears to be right now in Manhattan.  At the entry level of the market ($1M and under) sales appear to have slowed since June.  Yet New York’s luxury market has been on an upward trajectory in 2010 drawing the average and median prices up with it, to some extent masking reductions in some areas and price points.

Knight-Frank also suggests that while London’s Financial Sector bonuses will be strong, given the mixed economic reports, they expect delayed buying decisions from bonus rich buyer until early 2011.  Here Wall Street buyers tend to wait until the New Year to sign on the dotted line, but traffic to listings increases after everyone finds out their bonus numbers. 

The UK reports in many ways reflect the distinction of why the US national markets are down, yet Manhattan keeps maintaining a bottom line.  Property values here are not solely dependent on local employment or economic factors. They are however closely tied to Wall Street performance.  Expect more ups and downs, but know it’s the micro market that matters for your sale value.  – Tony Sargent