Chelsea Report
Chelsea is a vibrant and eclectic enclave of Prime Central London. It contrasts the traditional with the contemporary in terms of residents, retail, leisure and property. While its housing market is very established it stays current through the tasteful renovation and redevelopment of existing property while also welcoming new development. New large schemes on the fringes of Chelsea coupled with smaller developments slotted into the existing streetscape point to an exciting few years ahead.
Established Market
Chelsea has been an established residential location for many years but its blend of history, royalty, fame, trendiness and wealth make it a unique place to live.
Mixed in with the small mews and the spine which is the King’s Road, Chelsea is home to a vast array of property, including some with royal connections.
Chelsea, for example, is home to both the Royal Marsden and the Royal Brompton hospitals as well as the Sir Christopher Wren designed Royal Hospital Chelsea which has housed the Chelsea Pensioners since 1692 and has also hosted the Chelsea Flower Show since 1913.
Fame and the King’s Road
Aided by the lure of the King’s Road, which is renowned for its upmarket and chic shopping and was iconic during the swinging 60s, Chelsea started to attract rich and distinguished residents from as early as the 16th century.
And Chelsea has certainly had its fair share of eminent residents. These include AA Milne, Oscar Wilde, Bram Stoker, Mark Twain, Laurence Olivier, Judy Garland and Vivien Leigh to name but a few.
High Value Residential
Chelsea has some of the most expensive homes in the country and in London. Manresa Road, for example, is often quoted as being one of the most expensive roads in the Capital, but Chelsea is adorned with high value and prestigious property.
But Chelsea is more than just high-end housing. It is an engaging contrast between the old and the new and, importantly, the traditional values of Chelsea are always maintained even when new developments are delivered.
New Development
Chelsea’s housing offer is constantly changing. The historic building stock is often maintained and modernised through the renovation of frontages or the redevelopment of individual or small groups of properties. And it is rare that a parcel of land can be assembled to provide a sizeable new development.
When this does happen, it is often on the fringes of Chelsea, as is the case today. Two large schemes are now underway which will help create a new chapter in the evolution of Chelsea and mean an exciting time for the housing market over the next few years.
The most notable is the Qatari Diar Chelsea Barracks scheme, on the east side of Chelsea Bridge Road, just outside Chelsea and in the borough of Westminster, where almost 450 residential units will be developed over several phases.
Meanwhile, to the far south west of Chelsea, Cheung Kong Property Holdings is developing several buildings as part of its Chelsea Waterfront scheme. This includes the redevelopment of the Lots Road Power Station into just under 200 apartments.
Various smaller schemes in the planning pipeline will also invigorate the residential market over the years ahead. The largest is the Clearings site on Draycott Avenue which will be developed out by McLaren and Citygrove into 78 private units.
Looking further ahead, Chelsea may see a new train station, courtesy of Crossrail 2. But whether Chelsea will be better or worse off is the subject of much heated debate amongst businesses and residents.
Overall, 2017 should be a more stable year for the Chelsea residential market with the delivery of new schemes adding diversity to the established second-hand market.
Sales and Lettings Market
Sales Market
The sales market in Chelsea picked up during the final two quarters of 2016 with transactions around 50% higher than in Q2. Early estimates suggest Q1 2017 was also active.
Underlying demand for Chelsea homes remained robust throughout 2016 despite some headwinds but the number of active buyers increased during Q4 2016 and Q1 2017.
The key headwinds have been the two stamp duty reforms which have significantly increased transaction costs for higher value properties. Uncertainty, both before and after the EU referendum, compounded the stamp duty effect.
Both headwinds have acted as a brake on activity with the number of transactions notably lower than usual, especially during Q2 2016. The number of purchases throughout the whole of 2016 was 29% lower than in 2015 and 39% below the 2013 total.
Importantly, however, buyers and sellers are now adjusting to the new stamp duty regime and to the fact that the UK will be leaving the EU. This acceptance was reflected in the higher turnover witnessed during the final two quarters of last year.
Crucially, we expect the trading momentum to accelerate as we progress through 2017.
The graphic opposite shows that 44% of transactions in the year to Q4 2016 were below £1m, 27% between £1m and £2m with the remaining 29% selling in excess of £2m.
Residential prices have fallen in Chelsea and across Prime Central London as a result of the headwinds previously stated but we expect prices to stabilise during 2017 before pushing higher again from 2018.
Typical pricing in Chelsea is around the £1,900 psf mark but can often breach £2,500 psf in the many exceptional properties the area has to offer.
The graphic opposite provides the typical range of prices across various property types in Chelsea.
Lettings market
Rental properties in Chelsea are highly sought after, particularly as the area can offer both traditional and modern housing. This creates a broad range of demand especially for houses, whether located in one of the quaint streets or popular garden squares.
The diversity of the lettings market can be seen in the graphic opposite which shows that 35% of new tenancies in 2016 were below £500 per week with a further 30% of lettings between £500 and £750 per week. Just 6% of lettings were in excess of £2,000 per week.
However, the lettings market has suffered from an oversupply of available property during the course of the last year and this has led to a decline in rental values despite an underlying strength of demand.
Importantly, the market has recently returned closer to equilibrium given that much of the excess stock has now been soaked up by new tenants. We are therefore expecting a more balanced market in 2017.
We are forecasting rental levels to remain at similar rates throughout 2017 before rising marginally in 2018.
Rental levels vary markedly in Chelsea depending on location, property type and specification but on average a one bedroom apartment usually lets for between £450 and £750 per week with a two bedroom flat typically priced between £650 and £1,500 per week.
The Chelsea lettings market has seen a strong start to 2017, with an unusually high number of focussed tenants looking to move immediately.
Oversupply from the back end of last year has levelled out and we are seeing plenty of quality new stock coming to market to replenish supply, particularly from the large local estates who set the precedent for quality and value.
Most of the activity is from professional singles and couples in the one and two bedroom market under £1,000 per week and despite the seasonality of the family market, which usually spikes in September, we are also fielding a healthy number of enquiries from families looking for larger flats and houses.
Rents remain stable, and now that landlord flexibility on price has diminished somewhat, most properties are achieving within 5% of asking price.
Andrew Keelan — Chelsea Lettings



Outlook
The start of 2017 has been much brighter for both the sales and the lettings markets in Chelsea following a challenging 2016. Both markets have seen a recovery in transactions and we expect this to continue during the remainder of this year now that most of the imbalances have diminished. We expect sales prices and rental values in Chelsea to remain broadly the same throughout 2017 but they should push higher from 2018.
The ongoing Brexit turbulence will undoubtedly rumble on for the next wo years at least, but the residential fundamentals in Chelsea should remain reasonably stable.
Looking further forward, there is the possibility that Chelsea will have a new station when Crossrail 2 is delivered.
The current scheduling suggests this may not be sooner than 2033, so any possible local impact is not imminent. However, there is much lively debate about whether Chelsea needs or wants this new station with groups representing both sides of the argument being quite vocal. There is also conjecture and consultation about the exact location of the new station.

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