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Spotlight Mayfair and St. James’s Winter 2015/16

Savills World Research UK Residential

savills.co.uk/research

The gap is closing between prime location Mayfair and its smaller neighbour St. James’s

Market overviewA STEP CHANGE

T he well established prime locations of Mayfair and St. James’s

sit in the heart of London and are two of the most expensive and exclusive residential districts anywhere in the world.

Both districts consist of mostly luxury flats, generally converted from former grand houses and, to a lesser degree, new build.

Highly prized houses make up just 8% of residential stock in Mayfair and are largely confined to Charles Street, Hill Street and Upper Brook Street.

MayfairThe 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’sSt. 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 £500 million 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.

The Crown Estate owns 50% of the buildings

in St. James’s

Spotlight | Mayfair and St. James’s

The housing market around Mayfair and St. James’s over the past two years*A look at where the sales happened and at what average value for each specific postcode

FIGUrE 1

Source: Land registry *24 months to August 2015

Property pricesOver 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.

The rental marketIn 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

Average sale price, year to August 2015

n £3m+n £2m - £3mn £1m - £2m n Under £1m

MAYFAIR

ST. JAMES’S

SOHO

COvENT GARDEN AND SURROUNDS

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. n

Source: Savills research

What would the same property sell/rent for on our featured roads?FIGUrE 2

“There is a wide range of tenants renting prime property in the area” Sophie Chick, Savills Research

2 bED, 2 bATH WITH A lIFT IN GOOD CONDITION, APPROx 1,500 Sq FT

location Postcode Sale Price Rental value (pw)

Mount Street W1K £5m £2,000 – £3,000

Grosvenor Square W1K £6m £2,500 – £3,500

South Audley Street W1K £4.5m £1,750 – £2,250

Green Street W1K £3.5m £1,500 – £2,000

Curzon Street W1J £3.35m £1,500 – £2,000

Winter 2015/16

DevelopmentATTRACTIvE lOCATIONS FOR DEvElOPMENT

M ayfair and St. James’s are attractive locations for residential

developers experienced in the prime and ultra markets, due to their appeal to both domestic and international buyers. The developments expected to be delivered are small niche developments, which differ to other prime areas of London where there is a much higher concentration of new units in the pipeline. Developments are often conversions from office space

which attract a premium due to the large lateral living they can provide. In Mayfair, a recent price record for

the area has been broken with a development achieving an average of £5,000 per square foot. n

The Mellier, Mayfair

Key Developments in Mayfair and St. James’sFIGUrE 3

Source: Savills research

Area SchemePrincipal Player /

DeveloperPrivate Units

Development Status (as at q3 15)

Mayfair

Burlington Gate Native Land 42 Under construction

MacDonald House/ Canadian High Commission

Lodha Developers UK Ltd 41 Active existing use

22 Hanover Square Clivedale London 41Permission full

(subject to s.106)

One Berkeley Street Crosstree 39Permission full

(subject to s.106)

Clarges Mayfair British Land 36 Under construction

20 Grosvenor Square Finchatton 36 Under construction

96-100 Piccadilly Motcombe Estates 36 Application

Audley Square House Caudwell Properties 30 Application

60 Curzon Street 60 Curzon Street Ltd 31 Existing use inactive

4-6 Stanhope Gate Four Leaf Ltd 20 Permission full

77 South Audley Street Luxlo 7 Permission full

St. James’s

33 St. James’s Square 33 St. James Square BV 23Permission full

(subject to s.106)

St. James’s House Caraeno (Mirvac/Chantrey) 10 Permission full

7 Cleveland row The Crown Estate 8 Under construction

79 Pall MallMayfair Saturnus /

Mayfair Pluto8

Permission full (subject to s.106)

Beau House Dukelease 8 Permission full

Bennet House Amsprop 5 Permission full

Spotlight | Mayfair and St. James’s

06

demand currently concentrated at the lower price points. However, over the medium term, we expect the fundamentals of wealth generation will support medium term price growth and demand for higher value properties will return.

The arrival of Crossrail combined with the ongoing improvements to the public realm, retail and leisure offering that are being carried out by the large estates will continue to attract both domestic and international demand to the area.

The rental marketOver the next five years the London economy is forecast to continue strengthening, which will underpin demand for prime rental property over the medium term as more people move to London for employment opportunities.

In the borough of Westminster, the economic output is anticipated to increase by 19% over the next five years and 40% over the next 10. Both Mayfair and St. James’s are key employment locations within the borough, as well as prime areas to live, making them a popular choice for corporate tenants. As businesses expand, these locations are well placed to attract both new tenants and investors.

A potential risk to the sector is the high level of stock coming to the market from both new build properties bought by investors on the fringes of prime central London and accidental landlords who are delaying a sale of their property until the market adjusts to the new rates of stamp duty. n

OutlookTHE SAlES MARKET

T he outlook for Mayfair and St. James’s needs to be considered in the

context of the wider prime London market.

A decisive election was expected to boost confidence in the prime London market, but it still remains relatively price sensitive, particularly at the top end. This reflects the increased transaction costs resulting from successive reforms of stamp duty, and in the more domestic markets, the ongoing impact of increased mortgage regulation. We expect this to lead to muted price growth in the short term as the market adjusts to a new fiscal and regulatory backdrop.

Mayfair and St. James’s are two of the highest value locations within central London and therefore the new rates of stamp duty are having an impact on the top end of the market with

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Please contact us for further information

Charles lloyd Head of SalesMayfair & St. James’s 020 7578 5111clloyd@savills.com

Sophie ChickUK residential research 020 7016 3786schick@savills.com

Georgina bartlett FARlAHead of Lettings Mayfair & St. James’s 020 7578 5104gbartlett@savills.com

New stamp duty rates are having an impact on the top end of the market