When we started the prime central London index in the late 1970s, we said that ‘prime’ was the best property in the best locations. Little could we have thought at the time how much this prime market would change in subsequent decades.

When I started analysing property markets in the 1980s, prime London centred around Knightsbridge. The markets of South Kensington, Chelsea and Belgravia were its ‘acolytes’ while Mayfair (now the star performer of ultra prime) and Kensington were distinctly ‘fringe’. Most of Notting Hill and Marylebone was definitely ‘beyond the fringe’.

The Savills prime London index has therefore changed and expanded over the years to reflect these new prime geographies.

What we have seen is the real estate equivalent of the continuous replacement of old companies with new ones within the FT100 share index to reflect the share prices of only the biggest companies. In 2010, we replaced our old sample of lower grade properties with higher grade ones.

The ongoing refurbishment and renewal of stock means a property that might have been highly desirable in the 1980s simply doesn’t cut the mustard now. Prime central London’s residential stock has separated into grades, an evolution that has had as profound an effect as the physical expansion of prime central London.

Last year we changed our sample of index properties to reflect this. Dark basement flats and secondfloor walk-ups disappeared and we increased the weighting of now more numerous lateral conversions, refurbished, high quality and new developments that have changed the face of certain neighbourhoods – and in many ways changed the nature of what we now call prime.

These ‘grade A starred’ properties are among the World Class property ‘gold standard’. In seeking to understand the prime central London market it is important to understand the divergent performances of the different grades. Lucian Cook’s excellent new analysis reveals the huge disparity between the performance of top grade and lower grade properties.

It is this disparity in performance that has led us to review retrospectively and re-state our prime central London index, using the 2010 sample and rebasing it at 100 in June 2005. This was a relatively stable date in the otherwise volatile market of the last decade and a good place at which to base our review of the last six years.

Replacing our old sample with the new, ‘upgraded’ sample from this date has had the effect of lifting the index to new heights.

Like the shares within the FT 100 share index, the sample of properties within the Savills indices will continue to change in order to reflect the changing nature of the prime London market. Our analysis of the market from the point of view of grades, as well as location; looking at values, not just prices; and considering all stock, not just traded properties, has given us a multidimensional view of the market. This helps us to make sense of the, sometimes surprising, market movements of the last few years and the nature of the market going forward.

Taken from:
Spotlight: Prime Central London Residential, 2005 to 2011