By Clara Ferreira-Marques (Reuters)
London's housing market may be cooling, but not when it comes to 10-bedroom mansions with designer interiors, indoor swimming pools and private gardens in the capital's most sought-after neighbourhoods.
Demand for these homes — known as the "super-" or even "uber-prime" slice of the market and typically priced upwards of 20 million ($37 million) pounds — is still far ahead of supply.
And, fuelled by oil and commodity prices which are adding to the wealth of emerging market millionaires, the appetite is showing no sign of slowing under the weight of the credit crunch that is crippling average homeowners, lenders and businesses.
Eliza Leigh, a partner at estate agent Knight Frank, said the company in early July launched a flat for Grosvenor, the firm which manages the Duke of Westminster's property estate.
"In the first 48 hours, we generated 18 viewings for a property with a 25 million pound guide price," she said.
"We achieved that by close of business on Tuesday, having launched at 9 a.m. on Monday, and that purchaser exchanged contracts by Friday."
Analysts expect UK house prices to tumble at least 20 percent from their peak as a decade-long boom turns to bust. The majority of agents say business has ground to a halt and even the so-called "prime" market — roughly, homes between around one million and 10 million pounds — has slowed as once spendthrift bankers and executives draw back.
But "super-prime" is blossoming, helped by London's enduring popularity and — critically — by a lack of properties at the very top end. There are few coveted addresses and even fewer families moving out.
According to estate agent Savills, the number of sales in the 5 million to 10 million pound bracket in the first six months of this year increased only nominally, compared with a 15-20 percent rise for 10 million to 20 million pound deals.
Above 20 million pounds, however, deals are up 200 percent and now represent more than 10 percent of the ultra high-end properties sold — up from just 5 percent a year ago, when demand was concentrated at the lower end of the prime scale.
Purchases continue to make headlines — in July, developer Marcus Cooper sold London's second biggest house — a 25-bedroom mansion dwarfed only by Buckingham Palace — to an undisclosed buyer for 50 million pounds, almost twice the price paid last year.
"There has been a dramatic change. What we are seeing is a very limited supply of houses and people who come into the market happy to spend 20, 50, 100 million pounds," said Jonathan Hewlett, Savills' director for top-end London sales.
"They find it mind-blowing that they can't find anything."
CASH IS KING
Demand for the lower end of the prime market has historically come from London's City, but that has slowed as both the economy and bankers' bonus expectations cool.
"I would buy a flat now if I had the cash. Everything depends on my bonus," said one London banker hoping to buy a property above the million-pound mark, who declined to be identified.
"Nobody knows what their bonus will be like or what will happen to their job. Some people do not expect any bonus and given that the previous bonuses were paid in shares, there is a reduction in spendable money all round."
Instead, the demand for top-end, lavish homes is almost exclusively foreign, agents say, citing Russian, but also Indian and Middle Eastern buyers. They report only a handful of British bidders, many of them families who have agreed to sell their super-homes in the face of attractive offers.
Besides being undeterred by slowing financial markets, buyers with commodity-driven fortunes are also untouched by a collapse in mortgage offers which has frozen out first-time buyers and curbed the spending power of average Britons seeking to upgrade.
The majority of sales at the very high end are for cash, occasionally backed by loans using existing assets as collateral or with private banks.
Savill's Hewlett said buyers were optimistic the economic cycle would eventually turn and were still more worried about missing out on once-in-a-lifetime opportunities.
"Yes, London is going to have a bumpy ride for two years, but in 20 years time they'll be laughing," he said.
Without a widespread drop in global commodity prices — which could deliver a blow to emerging economies still largely unscathed by the crunch — developers and agents say there is little sign of a slowdown for the super-prime.
And critically, even with the economy on the verge of recession, the situation is different from that seen during the 1990s, thanks to an explosion of wealth that Hewlett compared to the Edwardian era of Rockefeller-like mansions.
"Nothing is totally recession-proof, but that end of the market is reasonably immune, simply because we have never had this explosion of global personal wealth before," said Neil Chegwidden, head of residential research at Jones Lang LaSalle.
"It has been in certain sectors, in certain regions — but it is unprecedented."
