This Market in Minutes focuses on the performance of Fulham and the prime south west London residential markets. Download here.

Prime south west London outperformed the wider prime London markets over the second quarter of 2013, with growth of 3.2% compared to the 2.5% increase seen across all prime London.

Annual growth now stands at 8.5%, much higher than the 4.4% seen in prime central London (PCL). Despite reduced city bonuses, these markets are benefiting from wealth accumulated prior to the downturn, new wealth creation, especially from West End hedge funds, and increased buying activity from international buyers working and resident full time in the capital.

At the same time, domestic wealth has resisted a move out of the capital in this recovery cycle, resulting in a concentration of demand in prime south west London.

A hybrid location

The best performing local market has been Fulham, SW6, with annual growth of 13.0%. Fulham is increasingly seen as a hybrid between central London and south west London by showing some of the attributes of both markets at a price point between the two. This reflects the fact that it has been undergoing a process of ultra-gentrification, attracting international and domestic buyers who, despite significant wealth, have been priced out of the central London market.

Although PCL is enjoying the strongest bounce back since peak, with prices 27.8% above, Fulham is only marginally behind at 27.5% above. With prime Fulham’s second hand property averaging around £980 per sq ft compared to £2,930 in the core central area of Knightsbridge, the relative value for money Fulham offers is evident. Nearby regeneration taking place at Earls Court will help bridge the gap between PCL and prime Fulham. New build continues to attract a premium over second hand stock across the prime markets.

London continues to be the preferred global destination for wealthy people to invest and live in. Besides global standing, amenities, quality of life and facilities, buyers often have an existing network of business contacts and friends and family in London, which also attracts them.

London has historically been renowned for stability in terms of tax and politics. This reputation continues and with unrest elsewhere in the world, this is likely to continue drawing buyers into the market. Other drivers include its time zone, enabling global trade, English as the main language, historical and global ties, and access to the financial markets.

International demand

International purchasers are a key component of the PCL market and are attracted by London’s status as a safe haven for wealth and a global city as well as its stable legal system.

The Fulham market is increasingly being driven by international buyers recognising Fulham as an ideal location to raise a family. UK buyers accounted for 81% of properties in Fulham in 2010, however, in comparison, in 2013 they accounted for only 49% of the market.

In particular, Fulham has attracted demand from wealthy buyers from Europe and the Commonwealth countries, attracted by international schools and specifically seeking family homes in London, both to purchase and let.

Global wealth creation

There is an enormous amount of overseas wealth coming to the capital. Many ultra high net worth individuals (UHNWI) are attracted to the prime London markets; some come because they are based here but others see a London property as part of a portfolio of must-have real estate.

Wealth-X estimate that in 2012 there were 190,000 UHNWIs, representing $26 trillion, with this value increasing by 30% over the next five years. This growth in global wealth, especially in emerging economies, is aiding more and more overseas purchasers to buy in London.

Whilst domestic wealth creation is weaker than it was in 2007, global wealth creation is still taking place. However, Oxford Economics forecasts for GDP growth over the period 2012 to 2014 have been downgraded for every global region since their previous forecast in 2011, with the emerging economies of China, India and MENA continuing to see the biggest growth.

Exchange rates

Graph 2 demonstrates how since peak the price of an average PCL property has been heavily discounted to buyers denominated in other currencies. For example, a PCL property is currently over 20% cheaper to Japanese purchasers paying in Yen than it was in the peak period of 2007.

This exchange rate opportunity has increased the level of international equity flowing into PCL property markets as it remains relatively cheap in many currencies compared to the market peak in 2007.

Taken from
Market in Minutes: Fulham and the Prime South West Residential Market