How Westminster planning restrictions will choke off London’s super-prime property boom

London’s prime property sector relies on international investment

Changes to planning laws made by Westminster Council could see the current boom in super-prime developments shut off and bring a scarcity value to expensive central pads in the next few years.

The local authority’s new restrictions, which were adopted in 2021 as part of the borough’s 2019-2040 ‘City Plan’, mean that no new residences or properties can be greater than 200 square metres in size, ‘except where it is necessary to protect a heritage asset’.

Westminster council covers the area from St John’s Wood down to Pimlico, including Hyde Park, Mayfair, Knightsbridge, Belgravia and St James’s.

“There won’t be new developments in the future, or certainly not for the foreseeable future, where you [can] buy a four or five bedroom flat,” Charles Lloyd, head of Mayfair sales at Beauchamp Estates, who put out new data, said. 

New developments include 8 Eaton Lane in Belgravia, W1 Place in Marylebone and No.18 Porchester Gardens in Bayswater. Each offers about 40 1-2 bed new apartments starting from around £1.5mn.

Some new residences, such as One Carrington in Mayfair and The Whiteley in Bayswater, offer flats with up to five bedrooms, reaching £10mn. 

Many new blocks are branded developments, such as hotel-adjacent residences, where residents have access to 24-hour reception, exercise facilities like pools and gyms, and sometimes even childcare services. 

“[Branded residences] have driven that increase in super prime buyers.   Those buyers have been buying as their principal home or their principal UK home and buying for long term and they’re sort of, they’re taking a 10-20-year view of it,” Lloyd said.

But crucially, none of these developments listed would receive planning permission if they were brought before the council today.

What does this mean for the market?

“A lot of it comes down to basic supply and demand, and supply is diminishing [as] super prime luxury new developments com[e] to an end,” Lloyd said. 

In 2023, 80 per cent prime properties in London were sold at a discount to their asking price, up from a third in 2021. The average discount was 8.3 per cent, according to the Coutts London Prime Property Index.

Key contributors to this have been rising interest rates and high inflation, which have made it more expensive to purchase property, plus an unwillingness of sellers to sell unless they reach their desired price, the report said. 

This trend is unlikely to continue in the coming years as supply gets squeezed and interest rates start to fall. 

Prime London house prices are predicted to grow by 10.8 per cent by 2027, compared with a national average of 3.8 per cent, according to Beauchamp Estates. 

Abolition of non-dom status

Policy changes announced in Hunt’s Spring Budget will make it more expensive for non-doms to live in London and may counteract some of these pricing pressures.

The changes will will cause many high net wealth individuals to leave for other jurisdictions in Europe” Gideon Stone, Co-Founder of Janine Stone & Co, said.

The Office for Budget Responsibility (OBR) estimated that 10 to 20 per cent of non-doms will leave the UK as a result of the change, and tax lawyers were inundated with calls from non-doms looking to leave the UK, according to the FT. 

Overseas buyers accounted for 45% of purchases in Prime Central London in 2023, up 6 per cent from 2022. 

Stone added that it’s “soon be a more difficult market” and that Hunt’s changes threaten to throw the sector “off-kilter”.

It remains to be seen whether this potential change in demand is enough to counteract supply pressures – other analysts argue that the change will have minimal effect on the London housing market. 

“London is a unique global city with a wealth of experiences, opportunities and excellent schools that combine to offer an exceptional lifestyle. Something that many will, I am sure, be happy to meet the revised cost of accessing and benefitting from,” Managing Director of Beauchamp Estates Jermey Gee said. 

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