In 2022, it was estimated that there would be over 920,000 millionaires and around 70 billionaires in the UK. With global wealth increasing despite tumultuous curveballs including Covid and the recent war in Ukraine, many private clients are looking for ways to diversify their wealth portfolio, often with the purchase of property.
These clients are also getting younger. There has been an increasing trend of baby boomers passing down generational wealth with the prime London property market playing a significant role in this exchange.
Summer 2022 saw Prime Central London (PCL) sales increase by 19 per cent compared to the previous 12 months – and showing no signs of slowing down.
The £1m+ housing market
Although there are supply issues within the general property market at all levels – the demand for £1m+ properties remains robust, far outstripping supply. Recent research has shown that the number of £1m+ home sales in September 2022 was 50 per cent above pre-pandemic norm, suggesting that purchasing a prime property asset is still attractive to many HNWIs.
There’s no denying that economic volatility has caused some clients to be more cautious when considering the cost of borrowing. However, the impact of increasing costs has been lessened for the affluent with many clients, choosing now as an opportune time to invest.
Where are HNWIs buying property?
London remains one of the most sought-after areas to purchase prime property. Namely, the golden postcode areas.
These preferred residential areas include Mayfair (W1), Belgravia (SW1X), South Kensington (SW7) and Notting Hill (W11). It’s always been said that the PCL market runs on its own cycle, separate to that of the general property market.
Despite economic volatility impacting the wider market, property of £1m+ purchases remain resilient. At LDN Private Clients we have found that sealed bids are commonplace and offers are being accepted above the asking price in London, especially within the £1m + market.
A similar story can now be seen nationwide. HNW clients seeking million-pound bricks and mortar investments no longer need to focus on PCL. The home counties, for example, offer a wealth of attractive assets with home offices, gyms, pools and vast green space.
In this scenario, we’ve found clients come to us for bespoke advisory services to secure funding and successfully purchase multi-million-pound properties, maintaining their liquidity.
Financing private client property finance
In order to finance these purchases, HNWs are utilising bespoke facilities that work in their interest.
For example, structuring debt effectively, either with a high loan to value (LTV) mortgage, or a loan without assets under management (AUM) requirements, or by securities backed lending, is a positive way to preserve wealth and acquire a flexible line of credit. As the market evolves, so do the methods of lending. More recently, we have also helped HNWIs purchase property through asset backed lending whereby art, whisky, wine, classic cars, watches and jets have all been used as security.
It’s not just purchases that are transacting in the private client space. We anticipate a very busy remortgage market next year, including in the HNW £1m+ space. With the payment shocks clients are receiving compared to their current historically low interest mortgage rates, it’s no surprise they are looking to lock in a mortgage rate as early as possible.
Interestingly, we are also seeing a lot of our HNW clients looking at tracker or variable rate mortgages, particularly those that work in banking and hedge funds.
With regards to lenders, the facility options available are continuing to expand and bespoke options are becoming more commonplace for private clients than they ever have been before. A lot of the private banks have been less impacted than other mortgage lenders following economic turmoil, with the majority of their lending coming from deposits held, meaning they can be competitive and flexible where high street banks may struggle.
As such, relationships with these lenders are essential and each private bank is very different in terms of risk appetite and their ideal client profile.
