Rich London homebuyers get drawn to postcodes with aristocratic landowners
HIT by a slump in luxury transactions, home sellers in some of London’s most exclusive districts such as Kensington and Chelsea are increasingly relying on the allure of their local aristocratic landowners to tempt rich buyers into deals.
To beat the slowdown, vendors are touting neighbourhood amenities, including fancy shops, restaurants, hotels and offices – all developed or leased out by some of Britain’s oldest and richest families such as Cadogan Estates, the Grosvenor Estate and the Howard de Walden Estate – to squeeze the most value out of their property.
Aristocratic estates have played a huge part in the development of the UK’s capital over the centuries. After the Great Fire of London in 1666, development accelerated, particularly on fields and meadows in the west of the city. Since then, vast swathes of land in much of London’s most affluent areas have been owned by a handful of families, including Cadogan in Chelsea, Grosvenor in Mayfair and Howard de Walden in Marylebone.
Those postcodes have typically attracted a stronger influx of buyers, because they have managed to maintain the quality of the streets, properties, leaseholders and commercial tenants over many decades, according to Peter Wetherell, a broker based in Mayfair. In areas where previous great estates have been sold, they lose that “golden thread” of continuous ownership, which has had a negative impact on property values, such as in Pimlico, a district auctioned off by Grosvenor in the 1950s, he added.
“The street frontages of Pimlico do not have the consistent management that those of Cadogan and Grosvenor benefit from,” Wetherell said. “As a result, property values are significantly lower than in Belgravia and Mayfair and the address is seen as far less desirable for wealthy potential buyers.”
For instance, in Knightsbridge – a district known for its five-star hotels and luxury department stores – most of the area is owned by a variety of freeholders rather than a dominant landowner. That’s having a negative impact on home values, particularly north of Harrods, because the neighbourhood is not shaped with the same consistency and vibrancy as one with a great estate, according to London property data firm LonRes.
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Rutland Gate – a Knightsbridge mansion owned by Hui Ka Yan, founder of the now collapsed Chinese real estate giant China Evergrande Group – has been struggling to find a buyer for roughly two years. Once billed as London’s priciest home, it almost sold for about £200 million (S$340 million) last year, some £25 million below the asking price, before negotiations broke down. It is now receiving bids at around 40 per cent below the original asking price, sources familiar with the matter said, asking not to be identified discussing the talks.
At the end of last year, a home in Knightsbridge that had originally been marketed above £20 million eventually sold for £10 million after passing through the hands of more than 10 estate agents.
Home values in Knightsbridge were 18 per cent higher than the prime central London average last year, a drop from more than 50 per cent in 2012, according to LonRes data. In Mayfair, that figure has increased to 52 per cent from 27 per cent in the same period. Whereas Belgravia, which was 2.9 per cent below the prime central London average in 2012, is now 14 per cent above that level.
“The demise of Knightsbridge has happened in an area of Kensington and Chelsea that Cadogan is not involved in,” said Anthony Payne, managing director at LonRes. “The level of redevelopment will have a real effect on whether you can sell a home or not in this market.”
To be sure, other factors are dictating the direction of home values in swanky London postcodes as well. A lack of new stock in Mayfair has helped prop up prices, while Knightsbridge has suffered from an exodus of Russian oligarchs who once made the area their heartland. Over the past year, some mansion sellers resorted to discounts of around 30 per cent to lure buyers concerned about higher interest rates and the potential for tougher wealth taxes.
Nathan Burkey, a former Merrill Lynch trader and now an entrepreneur, is among the sellers who will soon find out if he can overcome the slump. He is expecting £16.75 million for his five-bedroom mansion, being marketed by Sotheby’s and Knight Frank. It sits on the border of the flashy Belgravia and Chelsea neighbourhoods, a stone’s throw from some of Cadogan’s most prestigious real estate.
Burkey is betting the proximity should help fetch his asking price for the property that boasts a swimming pool, steam room and cinema.
Cadogan’s efforts to revive parts of Chelsea, such as Pavilion Road and Sloane Square, by building pedestrianised roads and retail spaces have had a “real effect” on the area, Burkey said. “It’s super helpful when it comes to creating a place that people want to live in,” he added.
The Cadogans – who trace their lineage back more than 1,000 years, just like the Grosvenors – hold their property assets through a series of family trust structures that allow them to maintain control across generations and curb tax liabilities when beneficiaries die.
In 1717, a member of the Cadogan family married the daughter of Hans Sloane, a physician to Britain’s royal family who owned 67 hectares of land in London’s Chelsea neighbourhood. That union paved the way for the Cadogans to become major landlords, and they are still passing down assets originating from that marriage more than three centuries later.
Their path to riches accelerated in 1776 when Charles Sloane Cadogan – the first earl under the current ancestral line – inherited swathes of London property that year that his grandfather Hans Sloane acquired six decades earlier.
The family managed to preserve its lineage and fortune over the following centuries, surviving Napoleonic battles as well as the Blitz, and redeveloped large parts of Chelsea with red-bricked mansions as the neighbourhood became a hub for London’s wealthy and bohemian populations. A central part of the Cadogan Estate is on King’s Road, a major retail hub for fashion brands including Ganni and Massimo Dutti as well as restaurants and art galleries.
In September, fund manager Fairway Capital secured planning permission for roughly 5,000 square feet of office space and six terraced houses on a former garage site in Belgravia after partnering with Grosvenor. The project, which will see the first complete terrace of mews houses built in Belgravia in over 60 years, has a gross development value of £50 million and will include private rear gardens behind each unit.
The site is a short walk from Sloane Street and The Gaumont, two major Cadogan projects nearing completion that will boast high-end shops, exclusive hotels and new homes.
“Our partnership is equivalent to repairing a small hole in a high-quality jacket,” said George Brooksbank, chief executive officer of Fairway.
The Cadogan and Grosvenor projects emulate Howard de Walden’s efforts to transform Marylebone, a red-brick Victorian neighbourhood once known for its doctors offices that’s now bustling with restaurants and chic retail shops, LonRes’ Payne said.
“People only used to go to Marylebone to see their doctor,” Payne said. “Now it’s a place you want to spend time in,” he added, noting the knock-on effect on home values in the area.
Jo Eccles, founder and managing director of buying agency Eccord, called Howard de Walden’s regeneration of Marylebone “a blueprint for placemaking”, which she believes Cadogan has tried to replicate in Chelsea.
Eccles, who helps the ultra-rich purchase London homes, said buyers take comfort in investing in an area which is under the stewardship of a well-run estate and will pay a premium as a result.
“It’s as close as you can get to a financially underwritten property investment,” Eccles said. “The only reason you see an empty shop front in Chelsea is because Cadogan is holding out for the right calibre of commercial tenant – and they won’t accept just anyone.” BLOOMBERG
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