Why flexibility is becoming the ultimate luxury
Making sense of the latest trends in property and economics from around the globe
5 minutes to read
The mobility of wealthy individuals has been among The Wealth Report's dominant themes for the past two years. Shifting tax policy, volatile geopolitics, flexible working and the rapid rise of new wealth hubs have all put a premium on one of today’s most valuable currencies: flexibility.
This helps explain the rise of 'try before you buy' in London's super-prime property market. More international buyers are opting to rent before committing to purchase, Knight Frank's head of super-prime lettings Tom Smith tells the FT this morning. Our data for London shows that the number of tenancies agreed from £1,000 per week was 16% higher in the first quarter of this year compared to the same period last year.
“In the past 13 months, four of my super-prime tenants — two in Mayfair, one in Kensington and one in Knightsbridge — have gone on to purchase the properties they were renting, two priced over £20mn and one over £50mn,” Smith tells the paper. “That was not something I had seen at all in the previous 12 months.”
The overhaul of the UK's 'non-dom' regime has unquestionably been a factor - you can read more from Tom Bill on that here. For now, the practice is still niche rather than widespread, but Tom Smith reckons as many as 15% of Knight Frank's London tenants engage in discussions, request an option to purchase, or seek first refusal. Meanwhile, Smith estimates that up to 5% of rental deals in the super-prime market - defined as £5,000 a week and above - lead to a purchase.
Very high, very steep
Could Keir Starmer's Labour have secured a similar sized majority without setting housebuilding targets that were so ambitious as to be nearly unachievable?
Members of the cabinet must wonder, because as the months go on, journalists are likely to focus less on meaningful increases in delivery and more on whether the government's 1.5 million homes target is actually on track to be met. Admitting the target will be missed will enable critics to label the party's housebuilding policy as a failure, which certainly isn't the case. Development in our urban centres needs much more support - read Ollie Knight on the fact that not a single spade hit the ground in 23 of London's 33 boroughs in the first quarter - but many policies aimed at supporting volume construction are already bearing fruit.
The Sunday Times got hold of an impact assessment of the government’s Planning and Infrastructure Bill showing that housebuilding will need to rise to 374,000 homes a year from 2027 - levels not seen since the 1960s. This is broadly in-line with the new mandatory housing targets, which collectively require councils to build about 370,000 homes a year. But last year just 184,390 homes were completed, and construction began on only 132,460.
Housing minister Matthew Pennycook stepped up to defend the government's targets, while admitting to the paper that “we will need to see a very steep trajectory and very high housing supply numbers in the later years of the parliament... it does absolutely involve some very steep increase over the parliament and into the final years.”
Testing the system
The Sunday Times spoke to Matthew Spry of the planning consultancy Lichfields, who pointed out that 160% more planning applications are under preparation now compared to this time last year.
This chimes with Knight Frank's latest Residential Development Land Index, which highlighted the degree to which planning sentiment has improved in recent months, helped by Labour's initial steps to reform the system. Six-in-ten respondents to our quarterly survey of more than 50 volume and SME housebuilders cite planning delays as a key drag on activity, the lowest proportion since we began our survey in 2020. The reinstatement of mandatory local housing targets and a commitment to greenbelt flexibility has boosted sentiment, particularly among the larger housebuilders.
Meanwhile, increased funding for planning departments and the appointment of more officers should soon begin to ease local authority resourcing issues.
The government's grey belt policy is clearly a key point of focus. More than 70% of housebuilders say they are considering or actively submitting applications for grey belt land, while 60% say they are seeking or may seek consents, even where sites are not allocated in a local plan. This points to growing confidence in testing the system and a view that planning decisions may be winnable at appeal where housing shortfalls are acute. That said, output is likely to be constrained by strict affordable housing requirements and restrictions on financial viability testing.
Bloomberg has an interesting piece this morning on Bangarra Group, one of Australia's richest family offices, which "is drawing up plans to build more than £1 billion worth of housing on land surrounding its UK golf courses." The Crown Golf portfolio of eight courses spanning about 1,500 acres of greenfield and grey belt land could support 3,000 homes, a third of which would be classed as affordable, according to the report.
New forecasts
We last published house price forecasts in November. Donald Trump had been elected US President just 20 days earlier, so it's fair to say that events have moved on since then.
We've refreshed our forecasts for UK house prices and rents to account for the new outlook. In short, we have revised up our estimate for UK prices to 3.5% from 2.5% this year due to the improving rate landscape. The figures have also risen slightly over the following three years, taking the cumulative five-year total to 22.8% from 19.3%.
Our rental forecasts are largely unchanged, but we have revised up our expectations for the UK and Greater London marginally due to the ongoing supply squeeze. We expect cumulative growth of 18.8% in the UK (17.6% in November) and 17.1% in London, up from 15.3% six months ago.
You can read the detailed analysis from Tom Bill here.
In other news...
Kate Everett-Allen unpacks the data showing strengthening buyer appetite for Tuscany
Elsewhere - Bank of England policymakers explain the split decision here, here, here and here, UK jobs market cools further, offering some relief to Bank of England (Reuters), LondonMetric buyers Urban Logistics (Bloomberg), Tallest NYC Tower to Lease Its Highest Floors for the First Time (Bloomberg), more than 10,000 civil service jobs to be moved out of London (FT), S&P 500 wipes out 2025 losses as stocks extend rally (FT), and finally, the man behind the rise of ‘golden passports’ (FT).