Mayfair

The district was established in the 17th century, named after a fair which was held there during the first two weeks of May. At the time, the area was a muddy patch of open ground, a far cry from the upmarket destination of today.

The transformation began in the early 1700s as a number of wealthy families began constructing smart homes around garden squares, attracting the upper classes to relocate from the City. The most notable is the Grosvenor family who developed Grosvenor Square and a number of surrounding streets and still play an important part in shaping the area.

Since then, Mayfair has not always retained its reputation as the prime residential address in London, particularly after the Second World War when many large houses were converted into offices following the bombing in the city.

However, over the past 15 years there has been a step change as Mayfair rose back up the rankings and is now the third most expensive residential location in London after Knightsbridge and Belgravia.

Within Mayfair, the reputations of different districts are changing. The public realm improvement works on Mount Street by the Grosvenor Estate proved to be hugely successful and they have since turned their attention further north to Duke Street and North Audley Street, in time for the arrival of Crossrail at Bond Street by 2018. East Mayfair, which is traditionally a retail destination, has seen a number of high-quality conversions to residential, such as The Mellier on Albemarle Street, changing buyers’ perceptions of the area.

St. James’s

St. James’s is a significantly smaller district, with just 326 residential dwellings recorded by the 2011 Census (compared to over 2,600 in Mayfair). It was initially developed as a residential location for the British aristocracy at a similar time to Mayfair.

While St. James’s has traditionally been more discreet and low key than neighbouring Mayfair, the gap is likely to narrow as the area evolves. The Crown Estate, which owns nearly 50% of the buildings in St. James’s, is investing £500m into the area over the next 10 years on a number of projects, including building on the area’s residential character and improving the public realm.

Property prices

Over the 12 months to July 2015 the average sale price in Mayfair and St. James’s was just over £3m, with 18% of sales transacting for over £5m. This is almost double the average sale price seen across the borough of Westminster and significantly higher than neighbouring Soho and Marylebone, which have average sales prices of £1.2m and £1.5m respectively.

Property values in Mayfair have increased significantly over the past decade, with price growth of 146%. More recently, although Mayfair has outperformed the wider prime central London market, annual price growth is in negative territory at -1.9%. This fall reflects the adjustment that the market made following the stamp duty reform of December 2014.

^{*24 months to August 2015}

^{Source: Land Registry}

The rental market

In line with the sales market, there is a significant premium for renting in Mayfair. The average monthly rent is £4,440 compared to £2,000 and £2,900 in neighbouring Soho and Marylebone according to Rightmove.

However, the rents vary significantly depending on property type and size. In Mayfair, the average rent ranges from around £2,400 for a 1-bed property to over £10,000 per month for a 3+ bed property.

Demand

The demand for prime property comes from a number of sources. The prime housing markets of Mayfair and St. James’s have been popular with international buyers since the 1970s and they currently account for 59% of purchasers, slightly higher than the prime central London average. The area is particularly popular with highly affluent Indian and Middle Eastern buyers.

Commerce is also a key driver of demand, particularly given the close proximity to a number of employment hubs. The largest employment industry for residents in Mayfair and St. James’s is the Financial and Insurance sector, accounting for 23% of employees according to the 2011 Census.

However, over the next five years we expect there to be a shift in the profile of demand. Oxford Economics are forecasting that while the Financial and Insurance industry will experience minimal growth in employees, the Professional, Scientific and Tech industry will increase by 15.6% to become the largest employment industry in central London. Mayfair and St. James’s are well placed to attract buyers working in these industries as there is already a high number of employees living there.

Investors are particularly attracted to Mayfair and St. James’s due to the high proportion of tenants living in the area. According to the 2011 Census, 46.0% of all households in Mayfair are in the private rented sector, and 66.6% in St. James’s, significantly higher than the 25.1% across Greater London.

There is a wide range of tenants renting prime property in the area, including affluent students, wealthy families and senior executives in high value employment sectors who are relocating for work.

International tenants are dominant in the prime lettings market of Mayfair, accounting for 69% of tenancies, with the highest proportion originating from Western Europe.

^{Source: Savills Research}