“We’ve had offers of around 25 million pounds, but they aren’t quite high enough,” says Noel de Keyzer, a veteran broker for Savills Plc, a London-based real estate agency. We are standing in a surprisingly sunlit subterranean family room beneath the garden of 29 Brompton Square in Knightsbridge, on the market for £27.5 million. Damien Hirst butterfly prints hang on the earth-tone walls of the recently renovated, fully furnished 1820s house.
“I would say that eight out of 10 buyers will take a house like this lock, stock and barrel, including the contents, and do very little in terms of altering the design,” de Keyzer says. By “a house like this,” de Keyzer means super-prime — the designation given to properties asking in excess of £10 million ($16 million), Bloomberg Pursuits magazine will report in its Holiday 2013 issue.
Despite the global financial crisis — or, more accurately, because of it — prices in the London neighborhoods of Belgravia, Chelsea, Kensington, Knightsbridge and Mayfair have risen 23 percent from their previous peak in March 2008, according to real estate brokerage Knight Frank LLP.
Since 2009, more super-prime properties have traded hands in London than in any other city, including Hong Kong, New York and Singapore; last year, the city accounted for about a third of the approximately 300 super-prime sales globally, according to research from Savills.
Super-Prime Market
Fear as much as greed drives the super-prime market. Although a third of London’s super-prime buyers are British, safety-seeking internationals predominate. Oil sheiks want an Arab Spring insurance policy. Wealthy French have fled President Francois Hollande’s new tax regime.
Ultra-high-net-worth individuals from the periphery of the euro zone — Cyprus, Greece, Italy, Portugal — have sought to shift assets out of the besieged currency and into pounds. For Russians, de Keyzer says, “the Putin factor” — the fear of a sudden shift in political winds — cannot be underestimated. Russians and citizens of former Soviet republics indisputably drive the market among international buyers, says Tim Wright, a Knight Frank partner specializing in super-prime housing.
That’s the push. Here’s the pull: For any emerging-markets tycoon, a London house confers “I have arrived” status. And then there’s the prestige of a British education.
“Their kids go to Eton or Harrow,” de Keyzer says, naming the two most famous British boarding schools. “London is favored in that regard over Paris.”
Matt Griffith, an associate fellow at London’s Institute for Public Policy Research, notes another, less virtuous draw.
“It is a very easy way to launder money,” he says. “It is a way to legitimize dubious wealth and to do so on a very large scale, which is hard to do with other types of assets.”
Wealthy’s Idiosyncrasies
After 25 years spent selling premium real estate, de Keyzer has become increasingly attuned to the idiosyncrasies of the global wealthy. Middle Eastern buyers won’t consider houses without elevators. Singaporeans require lots of staff accommodations. Russians, on the other hand, have few servants and consider privacy and security paramount. Indians like his- and-her walk-in closets. Americans tend to window-shop, preferring to rent for tax purposes.
Potential buyers sometimes phone de Keyzer directly. More often, inquiries are conducted through intermediaries: private bankers, lawyers, personal assistants — and, increasingly, buying agents. These specialized consultants market themselves as free from conflicts of interest because, in the U.K., brokers such as de Keyzer are paid by the seller.
Restrictive Rules
De Keyzer regards their growing ranks with ambivalence. Some lack qualifications and neglect to tell clients about the U.K.’s restrictive rules on modifying historic properties, or that what’s being “bought” is often in fact a long-term lease from the estate of an aristocratic family, such as the Grosvenors or the Cadogans, who own much of central London.
The best buying agents, however, help screen potential purchasers, particularly for their financial wherewithal.
“We don’t want time wasters,” de Keyzer says.
The principals, as the buyers are known, get personally involved at some point. They always view the house at least once, de Keyzer says. Even for a billionaire, £10 million and up is a sizable chunk of change. The viewing, however, may not last long: De Keyzer once watched a German billionaire buy a £25 million house in Chelsea after a single 15-minute showing.
While they may own property elsewhere, many shopping for super-prime — particularly above the £25 million mark — are neophytes when it comes to London.
“What they say they are looking for and what they end up buying is often completely different,” de Keyzer says.
Sticker Shock
Even billionaires, it seems, develop sticker shock in this town. Many who begin their search saying they don’t want to do major renovations wind up taking on fixer-uppers in order to get more house for their money. (Not Russians. “Russians seem to need to move out of Russia quickly,” he says.)
For brokers, London super-prime is a tiny club. Savills typically competes for listings with just five other firms: Aylesford International, Chesterton Humberts, Hamptons International, Sotheby’s and Knight Frank. Brokers make a standard commission of 1.5 to 2.5 percent, which at these prices can be a fortune in its own right.
In March, Savills sold 1 Cornwall Terrace on London’s Regent’s Park for £80 million, the most expensive sale so far this year, earning the brokerage at least £1.2 million. Given the steep price gains since the financial crisis, some worry that London’s super-prime market is a bubble poised to pop.
“It is difficult to say whether it’s a bubble because people are not buying on traditional investment metrics,” says Griffith of the Institute for Public Policy Research.
Knight Frank’s Wright insists that any froth in the market has already dissipated — and that, perverse as it may sound, today’s super-prime buyers want “value,” even at these stratospheric prices.
“They will not overpay,” Wright says. “If you price a property at £30 million when it should be £25 million, you don’t sell it in a hurry.”
