Prime Central London Property: Are We Approaching a Turning Point?

Insights from Hugh Obbard on PCL Market Trends & Investment Outlook

In a recent interview, Hugh Obbard shared a comprehensive and insightful analysis of the Prime Central London (PCL) residential property market. He provided valuable perspectives on trends, challenges, and future prospects.

The Road to Success

Hugh Obbard’s journey in the real estate sector —From Mayfair in the late 1980’s to Chelsea Harbour today, has included working and living in Hong Kong, Indonesia and coming across Donald Trump in New York along the way! — The recent discussion and Q&A provided a broad global perspective on London’s ever-evolving real estate landscape. As the founder of Obbard Ltd 30 years ago, Hugh’s firm is renowned for its focused ‘add value’ approach in the prime London residential market. Specialising in a fully integrated application (drawing on internal skills and experience in each disciple) to buying, selling, letting, asset managing, and refurbishing properties. Obbard Ltd has acted for clients from 41 countries, illustrating its international reach and London’s status as a global real estate hub.

The following highlights several take outs from the session.

Market Trends

Protectionism & Global Shifts: As global protectionism tightens, investors increasingly turn to stable, regulated markets like London, offering security through its legal framework and financial ecosystem.
Middle East & US Investment: The weakened pound makes London particularly attractive for overseas investors, with notable interest from the Middle East and the US.
Asian Investors Weigh London Amid Local Turmoil: Asian investors are facing economic and political challenges at home, leading to hesitation about investment in general. Despite ongoing political uncertainty in Europe, they continue to see London as a relatively stable and secure market.
Global Housing Policy Shifts: With countries like Singapore and Spain tightening foreign buyer regulations, London remains one of the most accessible markets for international investors and second-home buyers.
UK Tax Changes Impacting UHNW Clients: The abolition of the Non-Dom regime has led some UHNW individuals to leave the UK, raising questions on whether to sell or hold assets.
Domestically Driven Market: UK-based buyers continue to drive market activity.
Location & Lifestyle: International buyers seek locations that align with their lifestyle and social connectivity, with prime areas retreating to Westminster and Kensington & Chelsea.
Multi-Purpose Buildings: Middle Eastern clients are increasingly interested in properties that combine residential and family office spaces.
Supply Shortage of Top-Quality Rental Stock: Post-pandemic demand, coupled with fewer investor buyers, is leading landlords to upgrade properties for improved returns.
Discounting of Unmodernised Properties: With small to mid-sized developers exiting the market, unmodernised properties are being heavily discounted due to a lack of buyers willing to take on complex refurbishments.
Turnkey Properties: The demand for fully finished, move-in-ready homes continues, with clear premiums being achieved.
Trophy Assets: Middle Eastern buyers continue to drive strong demand for genuine trophy assets.
Return to Office Culture: As a return-to-office trend gains traction, properties in well-connected locations are seeing increasing demand, impacting both rental and sales values.
East London Growth: With strong connectivity to financial and tech hubs, East London’s appeal continues to grow.
Design Trends: Buyers are moving away from generic hotel-style designs toward personalised interiors with bespoke furniture, antiques, and original artwork.

Investor Insights

Price Adjustments: PCL property prices are down 15-20% from their 2014/15 peak, creating comparative value against other prime global markets.
Strong Rental Growth: Gross rental yields in Central London are around 4-5%.
Currency Advantage: The pound’s depreciation (from 64p per dollar in 2014 to around 82p today) enhances affordability for overseas buyers.
Reduced Competition: Buyer sentiment remains cautious, creating opportunities in a market with an above-average number of sellers.
London’s Resilience: Despite political and economic volatility, London remains a top global investment destination due to its world-class institutions and cultural scene.

Where the Market is Headed

Anticipating a return to growth: For global investors a clear sense of opportunity is growing, as base rates fall and sterling bottoms out, we believe the market is reaching an inflection point and a new cycle is imminent. It is possible prices may continue to weaken slightly in 2025. However, looking ahead, the markets anticipate base rates being sub 4% by the end of the year and settling somewhere closer to 3% by late 2026. It’s not hard to see the basis for a recovery and the start of a new cycle therefore within the next 12-18 months.

• Using the advantage: Canny buyers should be looking to exploit this market at its weakest which we feel may be this year. Critical is the quality of the opportunity as more often it is the mediocre or compromised that sees the heavier discounting. Sometimes its only in times like this that best in class can be bought at fair value.

• Optimising an exit: We see a lot of properties that have been on the market for some time with sellers only strategy to change High Street brokers. Those in need of an exit need to recognise that buyers have choice and are seeking both value and quality. The art of selling in today’s market is to price well and provide the product the market seeks, which means presentation and standards of finish/modernisation are more critical than ever.

• Holding for the long term: Existing landlords hold a growing advantage, with the issues of critical undersupply unlikely to be addressed within this Government’s life span, competition for best-in-class rental is going to grow. There is significant opportunity for uplift on rental incomes for underperforming assets.

• Negating high transaction costs: An overseas buyer making a £5-10m purchase would expect to pay around 17-18% in stamp duty. Add on legal costs and survey/valuation the costs are around 20%. Today’s market presents clear opportunities where an unmodernised property could be bought and refurbished resulting in the uplifted value comfortably exceeding both buying and selling costs. Such costs have killed off the individual project developer for now but in mitigating these through refurbishment a private buyer not only negates a huge cost but ends up with a bespoke home designed for them.

Key Takeaways

London remains a prime long-term investment.
Smart buyers should act before the market rebounds.
Rental demand and prime assets demonstrate strong resilience.
Turnkey properties and top locations continue to lead the market.

This conversation provides invaluable insights into the current state and future potential of the PCL property market. For those looking to enter or expand their portfolio, the message is clear: while caution is warranted, London remains a solid long-term investment destination, offering both wealth preservation and growth potential.

OUR NEWS

Meanwhile we were not so sad to see the back of 2024, a year that was distorted due to the market going into a form of lockdown due to an election being announced in early May and then the wait for the first labour Government budget in nearly 15 years being held at the very end of October. We start 2025 with plenty to do and an eagerness to see what the year brings.

Design & Build Updates

Obbard’s design & build division is thriving, with notable projects underway:

Covent Garden, WC2: Completion of a stunning 2,800 sq ft house redevelopment.
Marylebone, W1: Mixed-use corner block nearing completion by spring.
Chelsea, SW7: Finalising a 3-bedroom apartment for long-standing Hong Kong clients.
Knightsbridge, SW7: Commencement of an impressive lateral apartment renovation.
Notting Hill, W11: Upgrading a third-floor lateral apartment and its building.
South Kensington, SW7: Developing a 4-bedroom family house for rental.
Belgravia, SW1: Renovating a 3-bedroom apartment for sale.