Location mantra out the window in London

Location has always been a major factor when it comes to residential developments in all parts of the world. In the capital city of the UK, however, location is no longer the prime driver.

Instead, thoughtful design, efficient layout and the right mix of amenities, services and specifications are now the key elements for maximising buyer demand and value for developers, according to Knight Frank’s latest London Development Design Study.

In its exclusive survey of buyers in prime and super-prime new-built developments in London, jointly conducted by Knight Frank and cost consultants Core Five and MSMR Architects, the global real estate firm has found that space, layout, architecture and views are becoming an increasing focus for purchasers.

“Some 88% of respondents to the survey said that specification was an important or relevant factor in their decision-making when buying, while 64% said they would be willing to pay for higher-quality finishes and better specifications,” said Knight Frank.

Striking a careful balance

Knight Frank noted that developments need to strike a careful balance between short-term trends, technology and pragmatism.

“This means that schemes need to find a position within the market and be capable of delivering a flexible package that allows them to compete against peers,” it said.

On technology in new homes, buyers have ranked their Internet consumption, TV, heating, cooling and security as more important than built-in speakers and tablet integration, with more than 43% respondents saying super-fast broadband is the most important technology to them.

Based on the survey results, broadband is the most-used technology for 63% of the respondents, while the least used are built-in surround sound speakers and full home automation systems.

“There are instances where specifications can add to the desirability of a development, but this needs to be balanced against the additional cost.

“Buyers today are increasingly seeking best-in-class products, crucially where they see value, not a specific area or post code. As the market becomes ever more product-led, the importance of getting the unit mix, apartment configuration and quality right has never been more relevant.

“The best-performing developments follow a clear methodology, combining good ceiling heights, quality specification and a considered approach into how individuals use the wider building and its amenities,” said Knight Frank’s joint head of residential development Ian Marris.

Yes, more ceiling height, please!

Another specification that can add to the desirability of a development is ceiling height, said Knight Frank.

Some 90% of respondents said that ceiling height is an important factor when it came to their purchase, with 40% of the total considering it “very important”.

When asked how “high was high enough”, over 77% of respondents said they would like ceilings at 2.6m or higher, slightly above the traditional 2.4m standard found in many London developments.

Some 63% of respondents said they would like to have some form of cooling in their properties. However, having cooling in an apartment will lead to a higher purchase cost of the property. Moreover, accommodating the cooling units in the design without compromising layouts or ceiling heights is often challenging.

“Similarly, a total of 55% respondents would prefer to reduce costs by having underfloor heating only in the bathrooms, with radiators or forced air heating in the remainder of the property. This is particularly relevant given the current focus on avoiding overheating in modern apartments,” said Knight Frank.

Amenities and service charge

Amenities can also help to differentiate schemes, as 46% of respondents who purchased a building with amenities confirmed that they appreciated having access to them.

“Security, concierge services and underground parking are judged to be the most important for prime buyers — suggesting a minimum standard needed across developments,” added Knight Frank.

Around 69% of respondents said that given a choice between a larger apartment in a building with a concierge only, or a smaller apartment in a building with extensive facilities and amenities, they would opt for the former. This suggests that buyers do not view communal areas and facilities as a substitute for internal living space.

On service charges, a notable proportion of respondents were also willing to sacrifice additional facilities such as a steam room (62%), spa (80%) or wine cellar (84%) in order to reduce service charges.

Market update

According to Knight Frank, property prices in prime central London are 24% higher than their previous market peak in 2008, based on the global real estate firm’s index.

“The prolonged price growth over this time has been underpinned by the improving UK economy, as well as London’s perceived status as a safe haven.

“The current price trend for the top-end of the housing market in London reflects the fact that it is still absorbing the changes to stamp duty introduced in December 2014 and, more recently, April 2016,” it said.

The new stamp duty rules have increased the cost of buying properties worth more than £1.1 million (RM6.14 million) in the UK, and added a 3% levy for those buying additional properties. Knight Frank said this is being reflected in some price adjustments, which in turn has been mirrored by more moderate rates of price growth.

“Previous tax changes have been assimilated in recent years and it is expected that the market will, in time, adjust to the most recent changes,” it said.

This story first appeared in TheEdgeProperty.com pullout on June 2, 2017. Download TheEdgeProperty.com pullout here for free.