Savills World Research UK Residential Spotlight Autumn 2015 savills.co.uk/research 03
Spotlight Market overview an ongoing evolution continue to grow as demand increases for these central locations L ocated in the centre of London, both have undergone significant transformation over the past 10 years, led by a combination of estate regeneration and new luxury developments. As the evolution continues, the area is likely to see a further boost in demand from the opening of Crossrail in 2018 and further high-end development activity. Marylebone Over the past 10 years, Marylebone has evolved from the less fashionable neighbour of exclusive Mayfair to one of London s most popular districts. A large part of the Marylebone success story is its improved retail and leisure offering. This has been created, for the most part, by the two landlords that own the majority of the area, The Portman Estate and Howard De Walden Estate. Howard de Walden are credited with turning the run-down high street into a sought after retail destination by managing a mix of boutiques and small retailers. The Portman Estate similarly created a popular mix of tenants on Chiltern Street, Seymour Place and New Quebec Street. The residential property in Marylebone mirrors much of prime central London, consisting of Georgian squares and terraces, mews houses and Edwardian and Victorian mansion flats. A large proportion of the terraces have been converted into flats with just 12% of properties in Marylebone remaining as houses. Fitzrovia To the east of Portman Place, the district of Fitzrovia consists of smaller, irregular streets with fewer grand squares. The area has historically had a reputation as slightly disreputable, despite being surrounded by more wealthy districts. However, the perception of Fitzrovia is changing as illustrated by the new restaurants on Charlotte Street. The makeover began with demolition of the old Middlesex Hospital and Fitzroy Place, a high-end residential development, being built in its place. This helped change the feel of the area but Fitzrovia still offers good value as the price gap with its neighbours remains. Property prices Over the past year the average sale price in Marylebone was just over 1.5m, in line with the average across the borough of Westminster, while in Fitzrovia average values were 25% cheaper at 1.1m. Both locations offer a significant discount to neighbouring Mayfair where the average sale price was 3.3m and houses, although few in number, are selling for an average of nearly 10m. Marylebone in particular has seen strong growth over the past few years. Across all of prime central London, prices have increased by an average of 2.9% over the two years to June 2015. Over the same period, prime property in Marylebone has increased by 13.9%, the highest of any central London district. The rental market Rental values across both districts are of a similar scale to the sale prices. In Marylebone, the average monthly rent is 2,920 compared to 2,270 in Fitzrovia, a discount of 22% according to Rightmove. However, the rents vary
significantly depending on property type and size. In Marylebone, the average rent varies from around 2,000 per month for a 1 bed property to over 10,000 per month for a 4+ bed property. months. In the prime markets of, 52% of buyers were international, ranging from Europeans, Middle Eastern purchasers and a few Americans. However, 2015 has seen a shift towards British buyers who have accounted for 63% of purchasers Demand The demand for prime property in the area comes from a number of sources. International residents are an important source of demand for the prime housing market across London, accounting for around 38% of buyers over the past 18 Figure 1 The housing market around over the past two years* A look at where the sales happened and at what average value for each specific postcode Average Sale Price n Over 3m n 2m to 3m n 1m to 2m n Under 1m Marylebone (W1H, W1U & W1G) Source: Land Registry Fitzrovia (W1W & WIT) *24 months to April 2015
Autumn 2015 so far this year. Industry also plays an essential part, reflecting the good transport links to a number of key employment hubs, particularly the West End. The largest employment industry for people living in Marylebone and Fitzvoria is the Financial and Insurance sector followed by the Professional, Scientific and Tech sector accounting for 20.9% and 18.4% of the employees respectively, according to the 2011 Census. These are both high value industries but over the next five years Oxford Economics forecasts that while the Financial and Insurance industry will experience minimal growth, employees in the Professional, Scientific and Tech industry will increase by 15.6% to become the largest employment industry in central London. already account for a higher proportion of employees in this sector than the Westminster average and so are well placed to draw on the newly created wealth that will result, as Tech buyers in particular, look for alternative locations to live in. Investors Investment buyers are particularly attracted to the area due to the large number of tenants living there. According to the 2011 Census, 56.7% and 46.1% of households in Marylebone and Fitzrovia respectively are in the private rented sector, significantly higher than the average across London of 25.1%. There is a wide range of tenants, including families, couples and many students. In the prime rental market, demand is driven by a strong employment market and an increasing number Figure 2 What would the same property sell/rent for on our featured roads? Source: Savills Research of international companies in London. Savills figures show that nearly half of all prime tenants in are renting due to employment relocation and just 27% are British, with the highest proportion of tenants originating from Western Europe, accounting for 37%. n Period conversion-first Floor Flat 2 bed 2 baths, 1,000 square feet Location Postcode Sale value Rental Value* Marylebone High Street W1U 1.895m 1,100-1,200 Mansfield Street W1G 2.25m 1,200-1,295 Montagu Square W1H 2.35m 1,300-1,395 Nottingham Place W1U 1.895m 1,100-1,200 Berners Street W1T 1.7m 1,050-1,095 *Per week The demand for prime property in the area comes from a number of sources Sophie Chick, Savills Research Rental demand is driven by a strong employment market
Spotlight Development success encourages developers O ver the past few years, both Marylebone and Fitzrovia have seen an increasing number of prime residential developments and this is set to continue. While the majority of these developments are under 100 private units or much smaller, there have been a few game changing larger schemes. The largest development in the area for some time was Fitzroy Place, which is due to complete later this year and has helped to put Fitzrovia on the map as a prime residential location. Also located in Fitzrovia is Rathbone Square, which is scheduled to complete in 2017 and is the second biggest development currently under construction. In Marylebone, the developments in the pipeline are smaller. There are three notable residential schemes in close proximity, two are opposite each other on Paddington Street: Chiltern Place and The Chilterns and, just to the south, there is a planning application to redevelop Moxon Street Car Fitzrovia: Fitzroy Place Park. In addition, The Mansion on Marylebone Lane close to Oxford Street will be completed in 2017. The success of the current schemes and the prices being achieved has encouraged more developers to the area as Marylebone is firmly established as a super prime location and Fitzrovia moves up the rankings. n FIGURE 3 Key developments in with over 20 private units, which we expect to deliver over the next five years Site name Private Units Principal Player Development Status Fitzrovia Marylebone Fitzroy Place 235 Exemplar Properties Under construction Rathbone Square 142 Great Portland Estates Under construction Chiltern Place 56 Ronson Capital Partners Under construction Marylebone Square 54 The Ridgeford Group Full planning permission Marble Arch Tower 49 Almacantar Full planning permission The Chilterns 44 Galliard Homes Under construction Elliott House 31 Residential Land Full planning permission Harcourt House 25 Harcourt Investments In planning The W1 24 Royalton Full planning permission Marylebone Police Station 24 The Portman Estate Full planning permission The Mansion 21 Clivedale Properties Under construction Source: Savills Research
Autumn 2015 Outlook The Sales Market T he outlook for needs to be considered in the context of the wider prime London market. In the run up to the General Election the prime housing market stalled, following the changes in Stamp Duty and the threat of a mansion tax. Since May, some of the deferred demand from the pre-election period has begun to flow back into the prime London housing market, but the new higher tax rates are being keenly felt by buyers. This has restricted any significant boost to prices and transaction numbers. In, the average values are lower than other parts of prime central London so the extra Stamp Duty burden is not felt as strongly. This has led to a slight outperformance in growth so far this year, but the Mortgage Market Review continues to restrict the amount people can borrow and therefore limit house price growth. Across all prime London, we expect the combination of the higher taxes, increased mortgage regulation and the high levels of available stock built up during the pre-election period will lead to a relatively subdued market over the rest of 2015 and into 2016. The rental market Across prime London, we expect the strengthening London economy and continued expansion of sectors such as technology and telecommunications to underpin demand for prime rental property over the medium term. In, the number of private renters is already high and the area is very well placed to attract more investment from both traditional and institutional investors. A potential risk to the sector is if a high level of new build stock is brought to the market simultaneously which may lead to rents coming under pressure. n The area is very well placed to attract investment from both traditional and institutional investors Sophie Chick, Savills Research Research Residential Sales Residential Lettings Sophie Chick UK Residential Research 020 7016 3786 schick@savills.com Claire Reynolds Head of Sales, 020 3527 0401 creynolds@savills.com Isabel Bradshaw Head of Lettings, 020 3527 0406 ibradshaw@savills.com Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. savills.co.uk/research 02