Spotlight: South Kensington

Expert research and professional advice to help you make the best decision about residential property in South Kensington

Desirability defined

South Kensington has always had a strong identity. An area of elegant housing stock, perhaps more understated than some of its neighbours, it nonetheless includes some of the most sought-after addresses in the capital, including the likes of Thurloe Square, Pelham Crescent, Onslow Square, Queen’s Gate and Cranley Gardens.

South Kensington’s unparalleled cultural offering and access to a local network of highly regarded independent schools means it has an affluent, cosmopolitan, multinational resident profile, alongside long-established links to London’s highly successful financial sector.

Values of prime homes in the area peaked in September 2014. In early 2020, the pandemic put on hold a recovery in its early stages. Now, as we emerge from that challenge, price growth has returned and market activity has noticeably picked up, sowing the seeds for a more sustained upswing in the coming months and years.

While reacting to the ups and downs in the global economy, much like surrounding areas at the heart of the capital, South Kensington saw the value of its prime housing stock rise dramatically in the 35 years to the middle of 2014.

Over that period, prices of prime central London homes increased by an average of 5.7% above the underlying rate of inflation on an annualised basis. That means, despite the challenges faced by the market in the past eight years, long-term owners of homes in South Kensington have accumulated considerable housing wealth.

Putting down roots

Indeed, analysis of the sales we have undertaken in the past five years suggest that 40% of sellers in the area have owned their home for at least 10 years; somewhat higher than the 35% across prime central London as a whole.

Therefore, the fact that South Kensington is an area where people have put down roots means owners have been well placed to face the market headwinds of the past eight years.

In that period, the market has faced increased exposure to taxation (particularly in the form of stamp duty) and considerable domestic political uncertainty initially sparked by the decision to leave the EU.

These factors leave property in the area looking good value in a historical context, at a time when central London looks set to regain the vibrancy that has historically made it such a magnet for domestic and international wealth.

Despite a recent return to annual house price growth (an encouraging +2.8% in the year to March 2022), prices of prime houses and flats in South Kensington are still 21% below where they were in mid-2014 on average.

A new stage in the cycle

As we move into the next phase of central London’s housing market cycle, owners in South Kensington look set to benefit from a widened pool of buyer demand.

For investors, a return of rental growth over the past 12 months will have been particularly welcome. Having fallen by 8.1% in the year to the end of March 2021 during the height of the pandemic, rental values of prime South Kensington properties rebounded by 9.9% over the remainder of 2021 and increased by a further 2.2% in the first quarter of 2022.

Occupational demand

Occupational demand will be underpinned by all of the factors that have historically attracted a diverse range of affluent residents to South Kensington. Data from Experian illustrates that in the Courtfield electoral ward that sits at the heart of South Kensington, some 65% of the adult population have a degree-level qualification; with 29% employed in London’s financial and business services sector and a further 21% in professional scientific and technical roles.

40% of sellers in the area have owned their home for at least ten years

Lucian Cook, Head of Residential Research

Analysis of sales which we have undertaken in South Kensington is testament to its continued ability to access demand from those employed in the capital’s main wealth-generating sectors of the economy. In the past five years, 37% of our buyers have been employed in the capital’s financial and insurance services sector, one that attracts talent from across the globe.

In this respect, the same Experian data shows that – as would be expected of a prime neighbourhood of a world city – 62% of residents are born outside of the UK. What perhaps sets South Kensington apart is its appeal to certain nationalities. The 2011 census confirms that 8.6% of the local population spoke French as their first language (undoubtedly supported by the location of the Lycée) and an analysis of our own sales identifies strong demand from North American buyers.

Looking ahead

Over the period of the next five years, Savills Research forecasts prices across the prime central London market to deliver strong growth as we see an increase in international travel, as the effect of the pandemic subsides.

The timing of a recovery has become more uncertain as a result of the tragic war in Ukraine. Russian buyers themselves have not been a major force in the market for some years, being just one part of a diverse pool of international demand. While the market may take some time to adjust to measures introduced to increase the transparency around overseas ownership, the biggest driver of demand will be the impact on global wealth generation.

As we have learnt from the experience of the pandemic, there are many checks and balances in this area. The increase in the price of oil is likely to result in a rise in demand from Middle Eastern buyers. The continued growth in wealth generation from sectors such as tech and life sciences are expected to offset pressures from other parts of the global economy.

A focus on new developments

South Kensington has seen relatively little new build development. The majority of works have centred around the conversion and refurbishment of existing period homes into flats by entities such as the Wellcome Trust, with much of this activity taking place around the key transport hubs of South Kensington and Gloucester Road tube stations.

A recent application for redevelopment around South Kensington station by Native Land and TfL was refused on the grounds of negatively impacting local heritage. It would have provided 50 new homes (with 35% of these affordable) as well as retail and office space and refurbishment of the station. It could be that this plan is resubmitted in a new form.

Currently, there are only three sites under construction in the local area, all of which will provide fewer than 10 homes each. This includes 30 Queen’s Gate Terrace, Kensgate House and The Glen.

What our team says

South Kensington is a popular prime address, known for its excellent schools, family lifestyle and situation between two Royal Parks. That’s just part of what draws so many people to live here. Many have been motivated to move because of Kensington’s proximity to the city and West End and that trend has continued so far in 2022.

Over the past two years, we’ve seen an increase in those looking for a greener lifestyle. Buyers and tenants come in all shapes and sizes but notably, we’ve seen a real uptick in both families and young professionals. We expect these demographics and motivations to stay, further confirming South Kensington’s broad appeal.

As always, period flats, houses and new build schemes have proven popular. Following recent lifestyle trends, having outside space or being close to a park is a feature that’s starting to climb up wish lists though size remains at number one.

Whatever your property needs in South Kensington, we can guide you to make the right decision.

Get in contact with our team today.