Can Bayswater level up with the rest of prime central London?

By Liz Rowlinson

The first stages of the £3bn redevelopment of Queensway are bedding in. More change is on the way. But there’s still some distance to go to shake off the “cheap side of the park” jibes. Buyers are enjoying a different view of Bayswater, as luxury developments such as Park Modern transform the landscape. Can Bayswater level up with the rest of prime central London?

Just north of London’s Hyde Park on Queensway, the main commercial artery of Bayswater, The Whiteley is one of the capital’s most talked-about ultra-luxury apartment schemes. Behind the creamy-white art deco Portland stone facade of what was once London’s oldest department store, are 139 new apartments, a Six Senses hotel, plus shops, restaurants, an Everyman cinema and upscale Third Space gym. Yet, across the street from the Foster + Partners redesigned building (where a penthouse is selling for £39.5mn), it’s a different matter. A block of cheap souvenir shops, discount stores and fast-food joints buzzes about its business. A boarded-up shop reads “Queensway is changing”. After June these will be razed to make way for high-end shops and pavement cafés. But will the £3bn regeneration of the street with Parisian-style glass dining pavilions, help the “cheap side of the Park”, as it is known, level up with the rest of prime central London?

Despite all the elegant Victorian white stucco terraces, pretty garden squares and many a photogenic mews, the neighbourhood between Notting Hill and Marble Arch has, for several generations, been the grittier, under-the-radar sibling in the area — a sort of lost hinterland. Bayswater’s renaissance has been driven by developments such as The Whiteley, a luxury conversion of the former department store into apartments starting at £1.5mn. It was not always so.

When its genteel crescents and squares were built in the 1850s it was a quietly affluent area, where William Whiteley decided to build a drapery shop on Westbourne Grove that became the new Whiteleys store (with royal warrant) in 1911. The area’s desirability continued when Selfridges bought and extended the store in 1927; it also became known for its affluent multiculturalism with its Greek, Jewish and Middle Eastern communities.

But since the 1980s it has drifted downmarket.  Bayswater (W2) became the area “where you can get spacious period flats and mansion blocks at a discount for prime central London” says Moreas Madani of Tyburn Property Consultancy. The average flat sold for £1,229 per sq ft last year — considerably less than the prime London average of £1,577, according to LonRes, which tracks the prime market.

But as the wider prime central London market struggles with the effects of Brexit, stamp duty increases, higher mortgage rates and inflation, Bayswater has stayed stable. The average price per sq ft of a sold property fell just 0.1 per cent between 2023 and 2024, while transaction levels were up 9 per cent. The respective averages across prime central London were down 5.6 per cent and up 5 per cent. Average time on the market of 285 days (around nine months) is consistent across both.  The drive to regenerate Bayswater has not robbed it of its many quintessentially Victorian properties and businesses.

A new, younger demographic is now seeing the area’s comparative value as “less a compromise and more an opportunity”, says Madani. The smartening up of the area around Paddington Station, used by the Heathrow Express and more recently Crossrail, has already moved the dial.

Daven Chopra who works in finance is about to exchange on a one-bedroom flat in a stucco terrace near Queensway, after living in Maida Vale, an affluent area 1.5 miles north. “I use Heathrow every week and being so close to Paddington was also a big draw — and I am at my Hanover Square office on the Elizabeth Line in around 10 minutes. While some of the incredible buildings in Bayswater are [currently] rundown bedsits or guesthouses, I am confident this will change.”

The opening of Crossrail was also a plus for Jacinta Goulter who bought a one-bed flat in the area after moving from Queens Park, another affluent but less central area. “Being next to the Park has to be a good investment,” she says. She cites a new outpost of pilates brand FORM on Queensway, and Jeremy King’s new restaurant The Park as early signs of positive change.  The American-style restaurant is on the ground floor of Park Modern, a super-prime development by Fenton Whelan at the Park end of Queensway, which will bookend a swath of new development running down from The Whiteley.  Developments such as Park Modern are driving change.

At 28-34 Queensway, 30 apartments will be completed in early 2026. The company has also acquired the long block opposite The Whiteley which was formerly slated to become The William; it is applying for new planning consent for a seven-storey, Portland stone apartment building with shops and cafés, which will also be given a new name and identity.  “We wanted to be part of the transformation of Queensway but are glad The Whiteley got the ball rolling,” says Vabel co-founder Daniel Baliti. “You look at how Notting Hill changed, and then Fitzrovia, then Marylebone and this is next.” He says they are looking to bring in brands and a private members club that are fun, fresh and modern — “less stuffy than Belgravia”.

The Whiteley has been one of Savills’ best-performing new schemes, according to Edward Lewis, head of London residential development for the company, who says that its average £3,600 per sq ft is less than new prime developments in Marylebone (£4,000), and the area including Mayfair, Knightsbridge and Belgravia (£5,000-£6,000). The building has 38 apartments left to sell (from £1.5mn).

Alex Winship The Queensway Steering Group of landowners (including The Whiteley and Fenton Whelan) is overseeing the area’s redevelopment. As well as introducing more street cleaning and security, they are also planning new paving and planting that will lead down to new ornate public gates into Hyde Park. There will also be upgrades to Queensway and Bayswater Underground stations.

A £3mn refurbishment was recently completed at Porchester Spa — London’s joint oldest with York Hall, both opened in 1929.  Smaller developers are feeling the ripple effect of the Queensway regeneration. “Right now, Bayswater feels like an easier place to sell a property than Maida Vale,” says Ben Wilson of Knight James, which buy homes to renovate and sell on.

Current projects are in Westbourne Terrace — a wide, tree-lined street of stucco terraces near Paddington — and Gloucester Terrace. “I see Bayswater catching up with Notting Hill in 10 years.”  Some people like the idea that W2 is not full of Instagramming tourists asking for directions to Portobello Road Market Charles Irwin, Winkworth Madani of Tyburn Property has not yet seen a rush of buyers reappraising those stucco houses: “The effect so far has been more psychological than transactional.”

Camilla Dell of Black Brick Property Solutions agrees: “I think the area will level up but it will take a while. At the moment it’s a bit of a hard sell. You are still buying with the hope factor.”

Long-term residents are also hopeful, says Scott Joseph of estate agent Anderson Rose. “Since The Whiteley I have had calls from owners in nearby mansion blocks assuming they can sell their flats for double what they are worth — which is actually around £1,000 to £1,300 per sq ft.” The LonRes data would suggest that what Joseph calls a “slim increase in value” is nearer the reality. But even those houses in Bayswater’s most desirable pockets, and which achieve a £1,500 per sq ft price tag, are still at least 25 per cent cheaper than similar properties in Notting Hill, says Charles Irwin of Winkworth, who points to the “lovely little enclave” of Sunderland Terrace, Alexander Street, Durham Terrace and Westbourne Gardens.  He has just sold a six-bedroom house in Bayswater, off-market, for £6.35mn that he estimates would be £10mn in prime Notting Hill. He adds: “Some people like the idea that W2 is not full of Instagramming tourists asking for directions to Portobello Road Market.”

Popular private prep schools such as Wetherby, Chepstow House and Pembridge Hall are close by so the large properties of the W2 area are a draw for families. “I can see houses in Bayswater [rising in value] more quickly than flats,” says Irwin. LonRes figures bear this out: the average house in W2 is up 5.6 per cent last year on the pre-pandemic average — more than the 3.5 per cent average of prime central London.

The border between Notting Hill and Bayswater is becoming more blurred in people’s minds, believes Arthur Lintell of Knight Frank’s Notting Hill office, referring to the streets west of Queensway — around Leinster Square, Hereford Road and Ossington Street. “Younger, wealthier buyers, including a number of Americans, want proximity to both Notting Hill and Queensway.” A four-bedroom flat on Cleveland Square, currently under offer through Savills, at £3.25mn Americans have been the biggest group of foreign buyers at The Whiteley, says Charles Leigh, sales director at the scheme. There have also been a number of British downsizers from Notting Hill. “We’ve seen people moving here from a four-storey townhouse within a mile of The Whiteley.” Yet the buzz about the project has had little impact on the area’s rentals market so far. “Until everything’s up and running [on Queensway], I don’t see demand and rates increasing,” says Tanya Hasking, head of lettings at John D Wood. “We are quite some time off that.”

Andrew Norris who has bought a one-bedroom flat on Queensway, opposite Starbucks, is happy to play the long game. “If in time I need a bigger place, I know it will be a great rental investment,” says the surveyor, who moved from Balham, south London. “I bought when it was undervalued but I can see that changing.”  Some fear that the changes on Queensway may result in the area losing its distinct appeal and become just another slickly curated high street. But recent buyers such as Chopra feel that a new distinction is needed. “I don’t think there is anything to lose. I hope it becomes like Westbourne Grove — my favourite street in London.”

The haggling is in full swing: with a near record number of unsold new homes and the wealthiest reconsidering their options, estate agents are sweaty palmed, but savvy buyers are scoring hefty discounts.

By Beatrice Hodgkin and Hugo Cox.

Earlier this year, a client of buying agent Camilla Dell offered £3mn less than the c£20mn asking price for a home in a prestigious central London development completed in 2020. As the months wore on, the seller returned to Dell twice with revised prices above what she had offered. Each time, Dell’s client refused. Finally, a few days after the October Budget, the seller accepted the original bid.

“The public line is that new homes never sell with a price cut, but now that’s just nonsense,” says Dell, founder of Black Brick. “It’s a measure of how much power buyers have: in nearly 20 years the only market as good for buyers as this one was the few months following the financial crisis [of 2008].”

In super-prime central London, beloved playground of the world’s richest entrepreneurs, aristocrats, financiers and oligarchs, the haggling is in full swing — even for homes in new developments — as trophy-home sellers across Mayfair, Kensington, Belgravia, Knightsbridge and Chelsea drop their prices to achieve a deal.

In part, it’s because the buyer pool is diminished. Non-doms, considering where to buy their next home, are seeing less reason to pick London now their tax perks will be removed under measures set out by the new Labour government. Added to this, borrowing costs are high; an inflationary October Budget suggests they will remain so. And, in friction to the nationwide home shortage, unsold new homes in central London are close to record levels, as transactions stall.

In the three months to September, 102 homes sold for £5mn or more in London, down from 155 one year earlier, according to Savills, which predicts prices will fall next year.

Dell lists other recent deals she has struck for clients this year: nearly £3.5mn off a £13.5mn Knightsbridge town house and £475,000 off a £2.35mn Chelsea apartment; £1mn off a £4.75mn mews house near Sloane Square.

Never hasty to call a market downturn, selling agents for the upper tier of the sector are nonetheless steeling themselves.

“The probability of our market improving in the next six to 18 months is very slim,” says Jake Russell, head of sales at Russell Simpson, a central London estate agent that has sold 55 homes for more than £5mn since March. “Sellers are becoming acutely aware of that.”

A year ago, he listed a home for “just under £20mn”. By April, when it had received 40 to 50 viewings but no offers, he arranged a meeting with the sellers. Russell advised they drop the price by 15 per cent. They agreed; several prospective buyers who had viewed the home previously made offers; within a few days it had sold.  Russell’s clients — downsizers — are now renting. They plan to buy but are in no rush, anticipating lower prices if they wait.

Thinking like this further depletes the buyer pool, increasing the leverage for those who are willing to transact now.  The longer we were [looking] the more homes came on the market; later in the year prices made more sense.

I was in no rush and I felt more and more powerful ‘Annabel’, a recent first-time buyer of a house in St John’s Wood Annabel is in her early thirties and recently bought her first home. Over the course of 2023, she felt her bargaining position strengthen as the number of suitable properties grew and their prices fell.

“The longer we were [looking] the more [homes] seemed to come on the market; later in the year [asking] prices made more sense. I was in no rush and I felt more and more powerful,” says Annabel, who declined to give her real name.  She saw a dozen homes, had offers accepted on two — each time, 10 per cent below the list price — but pulled out of both purchases because of surveys or delays from sellers.

Finally, more than a month after viewing it, she offered £375,000 less than the £2.45mn asking price for a house in St John’s Wood. The seller accepted immediately.

On a recent November evening in Sautter of Mount Street, Mayfair’s celebrated cigar store, talk is of a changing mood. The rarefied smog (Sautter enjoys an exemption from the UK’s smoking ban) envelops a mostly male, international crowd, including a high-end tailor and a cigar shop owner from Hong Kong, both in their early thirties, a plump fiftysomething man with a thick Midwest American accent and 29-year old Charles Jerbus, originally from France. At Sautter of Mount Street, one cigar-smoking customer laments ‘my social circle is leaving’; his own parents relocated from their Belgravia town house to Zurich last year.

Between puffs on a short fat cigar, Jerbus explains how the tax changes and new Labour government are reshaping his social set. His parents, who arrived in London from Dubai in 2020, relocated from their Belgravia town house to Zurich last year when his mother, who “saw the [tax] changes coming”, took a new job there. “My social circle is leaving, it really accelerated after the election,” he says. Those departing include some of the leading classic car dealers, Jerbus’s profession, despite London’s prominent role in the sector. This year, 9,500 of those with £1mn or more of investable wealth are projected to leave the UK, double the number who left last year and six times the 1,600 who left in 2022, according to London-based Henley and Partners, which advises wealthy individuals on their residency choices. Only in China are they leaving faster.

One of this UK number, a Brit by birth, now a non-dom and working in private equity, who is currently in the process of securing himself and his wife passports for another country, sold his £24mn central London home shortly before the Budget.

Paul Welch arranged the man’s mortgage to buy the home two years ago, through his London-based company Million Plus Private Finance. “Once upon a time, a client like this would keep hold of their home, refinancing as a buy-to-let,” Welch says. “Today, with mortgage rates so high they are much more likely to sell.”

Last year he arranged 22 London home mortgages for more than £5mn; in 2022 the number was 14. So far this year, he has arranged three.  9,500 Those with £1mn or more of investable wealth projected to leave the UK this year; in 2022, the number was 1,600 (Henley and Partners) Some non-doms leaving the UK will keep their homes to retain a London base, according to Lucian Cook, head of residential research at Savills.

“But many who had been planning to move to London — as non-doms — and buy a home will now decide not to, so demand for [high value] homes will fall.”

Non-doms are not Welch’s only clients looking to sell their London homes. One, an elderly woman who owns a £5.5mn town house with a £2mn mortgage, has been renting it out for more than a decade. Last month she put the home up for sale.

“The rent no longer covers the cost of the mortgage. When she can get more than 5 per cent on the [proceeds of the sale] in the bank, selling is a no-brainer,” says Welch.

In the six weeks to the end of November, the best mortgage deal Welch could find for clients wishing to borrow £10mn at 60 per cent loan-to-value (LTV) increased from a rate of 3.68 per cent to 4.19 per cent.  Several factors suggest high rates could continue. First, the Budget was judged to be inflationary by both the Office for Budget Responsibility and the Bank of England. Second, “Trump’s presidential victory signals looser US fiscal policy, meaning tighter monetary policy [to control inflation] increasing pressure on the BoE to follow suit,” says Andrew Goodwin, chief UK economist at Oxford Economics.

Three weeks after the Budget, prices in swaps markets implied a fall in the UK base rate to 4.1 per cent by the end of next year — half a percentage point higher than the pre-Budget forecast of 3.6 per cent. Slower than expected falls in interest rates signal borrowing costs are likely to stay higher for longer, reducing buyer budgets and willingness to borrow.

But sellers, mindful of the forces holding buyers back, may see a clearer case for cutting prices to lure them into a deal.  Standing proud on Whitehall is the Old War Office, centre of operations during the second world war, and later the backdrop for the 1956 Suez crisis and the 1960s Profumo scandal — then, in September 2023, reborn as 85 upscale residences managed by Raffles Hotel.

Today, it is one of 15 completed high-end developments in central London with homes still for sale — including 60 Curzon in Mayfair, The Broadway on the Westminster site that once housed New Scotland Yard, and Belgravia’s Peninsula Residences.

Apartments in One Kensington Gardens have been selling since 2015. Central London’s total unsold new homes have averaged 411 over the past five years, more than double the 192 of the preceding five years, according to Molior, which specialises in London new-build data (this counts developments larger than 20 units — more than 90 per cent of new homes, it estimates).

There may be few developments in the pipeline — since 2014 stamp duty increases curbed demand for prime central London homes, developers have avoided starting new projects — but even at last year’s sales levels, the current rump of unsold homes would take roughly 18 months to clear. And, with average sale prices since the start of last year at £3,538 per sq ft, according to Molior, that would be no mean feat.

“Last year, unsold homes were at their highest since we started collecting data in 2009,” says Sam Long, senior research analyst at Molior. “There is an imbalance between supply and demand.” Those who are in a position to buy are taking full advantage of their strong bargaining position. Many are from the US, where the authorities tax citizens’ worldwide income wherever they are based.

“Non-dom regime or no — it doesn’t make any difference,” says Welch, who highlights that the buyer of the £24mn Mayfair home was an American entrepreneur.

“While there has been no tsunami of fleeing Democrats arriving since the election, I have plenty of US customers on my books who are looking to buy,” says Roarie Scarisbrick of Property Vision, a London-based buying agent.

In Knightsbridge, buying agent Camilla Dell says she negotiated £3.5mn off the £13.5mn asking price of a town house for a Middle Eastern buyer.

In Kensington, Chelsea, Holland Park and Notting Hill, British, Europeans and Americans dominate — typically families whose primary home and workplace is London and who plan to be here for the long term, says Russell. Cook adds that this group of “necessity” buyers will form an increasing share of transactions in the coming years.

Other buyers from abroad emerged from the October Budget feeling friskier than non-doms. The buyer whom Dell helped negotiate £3.5mn off the £13.5mn Knightsbridge town house is from the Middle East, and will use the home only for holidays.

“They won’t spend enough time there to be judged a non-dom,” she says. Several others of her clients are buying for children who plan to make London their home. Neither group will be fazed by the 2 per cent stamp duty increase on second homes, she adds.

The same is true of many of Russell’s buyers, he says, looking down the list of £5mn-plus homes his agency has sold since March in Mayfair, Belgravia and Knightsbridge. “Indian, Greek, Swiss, Lebanese, Chinese, Turkish, Nigerian, French, Portuguese . . . ”

‘It feels as busy as this time last year, for sure,’ says one visitor at the illumination of New Bond Street’s Christmas lights.

In May, a company controlled by Natasha Poonawalla, an executive director at the Serum Institute of India, the vaccine manufacturer owned by the Poonawalla family, spent £42mn on a building in Mayfair’s celebrated Grosvenor Square.

This is not the only recent purchase by Poonawalla, who could lose the tax benefits provided by the non-dom regime when it ends.

Last December, she and her husband Adar, who leads the family business (but who spends too little time in London to be covered by non-dom rules), spent about £138mn on a 25,000 sq ft home near Hyde Park, London’s second most expensive home sale ever.

At roughly £5,520 per sq ft, the home near Hyde Park hardly qualifies as a bargain. By contrast, the Poonawallas paid c£1,560 per sq ft for the Grosvenor Square building (it had not had a full-time tenant for several years and was marketed for commercial use).

A 10-minute walk to the east of Sautter cigar shop, the gathering for the illumination of New Bond Street’s Christmas lights seems to signal bright prospects for London’s premium home market. Beside a pop-up bar, four carol singers belt out an arrangement of “O Little Town of Bethlehem”.

This being New Bond Street, the bar is a converted 1934 Rolls-Royce coupé whose customers sip champagne behind velvet ropes. The carol singers, who sound like they belong in the opera, are impeccably dressed in black tie. “It feels as busy as this time last year, for sure,” says the woman who chaperones them, a clipboard clutched against her plush winter coat.

Outside the store of Chanel, the sponsor of this year’s lights, a large crowd gathers to listen to representatives of a local business association lauding a bumper Christmas season for local retailers. The street is rammed.

Scarisbrick is unsurprised; he reckons the most affluent are staying put, and holding on to their central London homes.

“Yes, some [wealthy residents] are considering their options, and having an exploratory [relocation] tour of Milan or Dubai,” he says.

“But what they’re not saying is: ‘holy shit, I have to get rid of my house’.”

Sales and rental prices are down in the capital’s most exclusive postcodes – but activity is returning

By Liz Rowlinson

In July, Tel Aviv-based corporate lawyer Ami H Orkaby bought an apartment in London’s Mayfair. When he can fly to London he intends to use it himself, making the most of the expensive restaurants, the shopping and Annabel’s private members club on his doorstep.

“I am confident that Mayfair will bounce back after the pandemic, like it has done many times before in history,” he says. “I saw an opportunity to buy in the current market, with a weak pound and a softening of prices.”

These days, wealthy international buyers are conspicuous by their absence in parts of central London. Some streets remain eerily quiet and free from the supercars that regular visitors like to bring over for the summer.

The lack of buyers and renters from overseas has hit the local sales and lettings markets. While parts of the country underwent something of a “mini boom” when the housing market reopened after the Covid-19 shutdown — the UK’s average property price surged in August to record levels, according to Nationwide — demand for London’s prime homes has been slower to bounce back.

With so much interest in suburban and rural living recently, we took a look at the property market in the capital’s most exclusive neighbourhoods, to see how its luxury real estate is being affected by the pandemic.

How many homes are selling?

In July and August, the number of homes sold (exchanged) across London’s prime areas across all price brackets was down by 24 per cent compared with the same period in 2019, according to data from LonRes, a research company.

However, for the capital’s most luxurious homes, those priced above £5m — where sales tend to be less reliant on credit — transactions in July and August were actually significantly higher than they were last year: up 31 per cent on the same period in 2019.

Marcus Dixon, head of research at LonRes, says he thinks the prime London market has been resilient. “Transaction volumes are recovering,” he says. While sales are still down, the number of properties going “under offer” in August was 8 per cent higher than in the same month last year.

Guy Gittins, managing director of Chestertons, which specialises in selling homes in prime central London, says his agency had the busiest July in four years. That month, they dealt with 1,150 offers and agreed the sale of 272 properties, compared with 780 offers and 181 agreed sales in July 2019.

Time to bargain?

One of Chestertons’ sales agreed in July was a three-bedroom apartment in Mayfair that went for £4.65m. The Hong Kong-based purchaser, who had viewed the apartment a year earlier when the asking price was £5.95m, now thought it looked good value.

The property was initially put on the market back in May 2018 for £6.5m — meaning the final sale price was 28 per cent lower than the seller had originally hoped for.

But such price drops are not the norm, Dixon says. Across prime property in central London, the average discount achieved in August was 7.6 per cent lower than the initial asking price — smaller than it was in August 2019, when the average discount was 8.9 per cent. In fact, achieved prices in August were up 2.8 per cent on where they were a year ago, according to LonRes.

Savills, though, expects prime house prices to fall 2 per cent this year, and predicts slower price growth than after previous downturns due to the pandemic’s impact on the global economy and wealth generation.

“The pace of the recovery will be dictated by the lifting of travel restrictions,” says Lucian Cook, Savills’ residential research director, who is confident London’s appeal to overseas buyers will endure.

The lack of overseas buyers

In the 11 weeks to mid-August, the number of new buyers registering with Savills who were looking for £1m-plus homes in the south of England, excluding London and the commuter belt, was up 120 per cent on the pre-pandemic average.

In central London, where international buyers have been unable to view homes because of travel restrictions, prime registrations were down nearly 20 per cent.

This has meant UK-based buyers have faced less competition, agents say. Peter Wetherell, chief executive of Wetherell estate agency, points to the sale of a property at 47 Grosvenor Square for £18.6m, which went to a UK-based family in August within 24 hours of it going on the market.

At the end of July, Wetherell sold a four-bedroom home at 76 Park Street, also to a UK-based buyer, for £4.85m. It had a guide price of £5.5m.

As in Mayfair, the lack of international buyers in the Knightsbridge and Regent’s Park areas is a growing concern. “They still want to buy in London but can’t get here,” says Paul Finch of Beauchamp Estates. Other world cities face the same problem, he adds: “Which other cities might [investors] choose? The grass is not greener in the markets of New York, or Hong Kong.”

It’s clear that the buzz and many of the things that make London great are just not there right now Camilla Dell, Black Brick. In Hong Kong, which had experienced widespread civil unrest and pro- democracy protests before the arrival of Covid-19, sales of properties priced above HKD $20m ($2.56m) dropped by 17 per cent in the first half of 2020, compared with a year earlier — reaching their lowest level since 2016, according to JLL, the global property company.

In Manhattan, the number of sales in the second quarter of 2020 was down 54 per cent compared with the same period last year, the largest decline in at least 30 years, according to estate agency Douglas Elliman. The median sales price fell 18 per cent, compared with the same period last year, to $1m, the biggest drop in a decade.

Estate agents in the UK capital argue that upheaval elsewhere in the world could benefit London’s prime market. Many cite the possible demand from the 200,000 Hong Kong citizens who, according to Foreign Office estimates, could move to Great Britain in the next five years.

A steep drop in rents

Travel restrictions have also had a big impact on the rental market, which has been hit by a sharp drop in demand and significant increase in supply. Since June, the number of new lets every month has been 25 per cent lower than in the same month in 2019, according to LonRes. Meanwhile, there are now 60 per cent more properties on the rental market than a year ago.

The lack of tourists has forced Airbnb landlords to list their homes on the long-term rental market. Since May, about 12 per cent of all the new homes available to rent in London’s Zone 1 were previously let on a short- term basis, according to Hamptons, which calculates that the average rent in inner London in July was 8.4 per cent lower than in July 2019.

“After six months of receiving no rental income, the high service charges and mortgage payments are beginning to bite so landlords are staring down the barrel,” says Cory Askew, director of central London sales at Chestertons. “Some are selling up, others are dropping their prices.”

“It’s a great time for tenants to negotiate 20 per cent off their rent,” says Gittins.

Changing tastes

In recent weeks, the popularity of London’s prime “villages” — smart, green areas such as Richmond and Hampstead — has surpassed the capital’s traditional golden postcodes in Belgravia, Knightsbridge and Kensington, says Camilla Dell of Black Brick, a buying agent.

In anticipation of future lockdowns, buyers are looking for access to parks (for all those quarantine dog purchases) and good high streets.

“Buyers might only move 2km in search of a better environment, and more space, for the same budget,” she says. Now, they might opt for a house in St John’s Wood in north London, rather than a flat in Marylebone in central London; or a four-bedroom house in west London’s Fulham with a garden, in preference to a two-bedroom flat in South Kensington.

House and Home unlocked 

In Chelsea, the market for homes below £2m has been the strongest, driven by purely UK-based buyers, says Percy Lendrum of estate agents Dexters. “A two-bedroom flat in Lennox Gardens sold within 48 hours for well over the asking price of £1.25m after five offers.” Such properties overlooking communal gardens are much more likely to sell after Covid-19 than those without, he says.

But the future of prime central London all hinges on whether people will actually want to live and work there post-pandemic, or if the city endures another lockdown.

“When we do viewings there, it’s clear that the buzz and many of the things that make the city great are just not there right now,” says Dell. “But it’s too early to say whether the shine has gone off London as an investment.”

By Antonia Cundy and Hugo Cox

After one of his lectures at the Bartlett School of Planning in London, Peter Rees was approached by a student who was surprised when the professor did not recognise him. “He said to me: ‘My parents bought six apartments in the block where you live, but I’ve moved somewhere better now,’ so that put me in my place.” The City of London’s former chief planning officer did not mind the snub to where he lives — a 1,000 sq ft flat on the 27th floor of The Heron. But the anecdote is a telling example of how quickly once sought-after high-rises can be upstaged by new super-luxury developments. “Developers started thinking: ‘OK, how can we raise the bar?” says Chris Graham, a marketing specialist in luxury homes. “As opposed to just the standard things — the swimming pool, the wellness spas — they’ve started adding golf simulators, private cinemas, wine tastings, private entertaining spaces, a hobby room, and so on.”

As the supply of super-luxury homes has increased in recent years, developers have been locked into a race to outdo one another to attract buyers. But with costs escalating — and Covid-19 putting a damper on shared facilities — will residents still want to pay for them? For the upkeep of the building and its gym, pool, private cinema, and members’ club, as well as the 24-hour concierge team, Rees pays an annual service charge of £10 per sq ft. This is cheap compared with London’s priciest spots. At the Four Seasons Residences on 20 Grosvenor Square, residents pay £14 per sq ft for perks including a supervised children’s playroom, library, pool, a wine storage and tasting room and a network of car lifts to deliver residents’ vehicles to the deep-basement parking.

A decade after it was built, the service charge on a £30m, three-bedroom apartment in One Hyde Park, Knightsbridge, is £22 per sq ft — or £55,000 per year. Managed by the adjacent Mandarin Oriental hotel, it has underground parking, wine cellars, an “ozone” swimming pool (which uses O3 as a disinfectant), a squash court and golf simulator. Buyers have been “astounded” at the asking prices of these new luxury flats, says Roarie Scarisbrick, a partner at buying agent Property Vision. As for their service charges, he estimates that the going rate for London’s best spots is now £15-£20 per sq ft. Manhattan’s top-priced buildings command similar fees. At 432 Park Avenue, a 426-metre skyscraper overlooking Central Park, the amenities include a golf simulator, a private restaurant, multiple cinemas, a billiards room and a library — and, when the building was first finished, cost residents an annual $27 per sq ft in service charges. At 35 Hudson Yards, where the first homes went on sale in March 2019, the charge is $35 per sq ft per year — which may be Manhattan’s priciest, according to data from GS Data Services in New York.

Mounting maintenance costs

The rise in decadent amenities is not the only force driving service charges. Glass facades — common among today’s high-rise luxury towers — can make for high-energy costs and maintenance bills. The glass “skins” typically comprise a series of double-glazed floor-to-ceiling windows with strengthening laminates that can form the complete exterior. Rees estimates that these must be replaced every 40 to 60 years, at huge cost and major disruption, since residents must be temporarily rehoused. “Effectively you’re taking the walls away,” he says. “You’d need to rehouse the residents for 12 months at least. How do you compensate them?”

“While buyers of office buildings factor the costs of such re-cladding work when they come to price a building, residential buyers typically do not,” says Simon Sturgis, founder of Targeting Zero, a sustainability consultancy in London. Rees reckons the high costs associated with this work mean many of the new high-rise glass-fronted apartments may have a shorter life than the leases of the apartments they contain.  “From the leaseholder’s perspective they may have a depreciating asset, not in the short term, but in the future,” he says. “We’re talking about this conflict of 125-year leases in buildings where major parts of it only have a life of 65 years.” If the management companies responsible for running the buildings find themselves underfunded for such work, the result could mean large and sudden hikes in service charges when work is needed, he adds.

The cost of Covid-19

The arrival of coronavirus has further complicated matters as developers try to create buildings that are virus-safe.

“More elevator cores, wider corridors and doorways will help alleviate congestion but will increase cost and reduce usable residential space,” says Riyan Itani of Savills’ International Development Consultancy in London. “Developers will also need to consider how they can manage the density of usage through safety checks and implementing air filtration systems indoors.” Social distancing is curtailing the use of communal facilities. Regulating the number of swimmers in the pool is one of many new tasks of the top-end concierge manager; Itani reckons temperature checks could soon be added.

As Covid reduces the appeal of luxury apartments with shared facilities, developers in Hong Kong are increasingly experimenting with pay-as-you-go for core amenities such as gyms and pools, says Aradhana Khemaney of Savills’ Hong Kong office. “Not all residents want to use all of the facilities on offer,” she says. “Especially at the moment.” According to Camilla Dell, founder of buying agency Black Brick, London buyers are deserting luxury high-rises for their own four walls. “In the pandemic some weren’t even able to use those gyms and facilities but were still paying these charges,” she says. “In the world [post-Covid] the idea of sharing facilities really doesn’t appeal now.” 

Luxury living costs all under one roof But some fans of all-in luxury apartments disagree. In Singapore, owners of apartments at the Ritz-Carlton Residences in the Orchard Road district enjoy perks including tennis courts, two swimming pools, a library, three sky terraces — one featuring a manicured maze — as well as the usual fitness centre, coffee bar and hosting spaces. The price to residents is about $7.70 per sq ft a year. Plus, as freeholders rather than leaseholders, residents have control over how the building will be maintained.

Edward, who did not want to give his last name, a local who lives with his family in a top-end apartment block in Singapore’s Marina Bay, says that Covid-19 has done nothing to dent the appeal of his building’s facilities. “The day after government lifted social-distancing restrictions, the pool was full,” he says. Tot up all the additional expenses of living a life of luxury in your own house, meanwhile, and service fees may look like good value. “If they were living in a standalone home somewhere, they may require a house manager who might be on £55,000, a driver might be on £30,000, a childminder might be on £50,000,” says Gabriel York, co-chief executive of Lodha UK, the developer behind 1 Grosvenor Square, where the average home is between 3,500 and 4,000 sq feet, and the service charge is £15 per sq ft. For overseas clients with children at boarding school, a member of Grosvenor Square’s team will drop off and collect the child, for example. “In one of these developments their requirements for these household staff would be reduced,” he says.

Scarisbrick says that the convenience of lock up and leave will always ensure buyers will stump up hefty service charges. “The people who are buying these places simply don’t want to deal with the responsibility of their own house, they desperately want the security and convenience of these places.” For this group, the economics of fast-ageing glass and steel buildings may be less of a concern. Even Rees is sanguine. “At my age, having paid off my mortgage, if the thing depreciates it’s not the end of the world, to be honest.”