Waterfront homes market overview 2023
BY CHRIS DRUCE Senior Analyst, Residential Research
London Waterfront exchanges at five-year high
Rebased to 100 = 2019 (Year to May)
2019
2020
2021
2022
2023
Cash buyers in pole position as demand for waterfront property remains strong
Despite the fading influence of the ‘escape to the country’ trend, demand for waterfront living remains strong, as buyers make lifestyle changes after the experience of successive pandemic lockdowns. With the end of the era of ultra-low borrowing during the past year, cash and equity-rich buyers have found themselves in a strong position. The percentage of cash buyers purchasing UK waterfront properties has averaged 54% in the past five years. This compares with 29% in the mainstream market in the same period.
UK waterfront property exchanges were up 11% in the year to May versus the five-year average, despite the Bank of England having now raised the bank rate to a 5%, its highest level since 2008 in a bid to contain inflation, with further increases expected. This will provide some insulation from downwards price pressure as supply levels increase from the depths of the pandemic, when the so-called ‘race for space’ combined with a stamp duty holiday led to fierce competition among buyers and tight availability. Despite moderating from pandemic highs, demand for UK waterfront property has proved resilient. UK waterfront viewings were up 3.7% in the 12 months to May 2023 versus the five-year average, and offers made increased by 1% in the same period.
Waterfront property continues to attract a premium too, in part due to the relative scarcity of supply relative to the UK’s total housing stock. The average premium for a UK waterfront property, compared with an equivalent home that does not offer the waterfront lifestyle, was 48% in the second quarter of 2023, according to the Waterfront Index.
The most popular location for a property based on average premium was next to a lake or loch, with an uplift of 71%. Second was coastal, with an average premium of 66% compared with an equivalent non-waterfront property, and third was estuary (64%). New instructions for UK waterfront property were up 37% in the year to May 2023 versus the five-year average and improved supply from a low base will see an increase in transaction volumes.
Increase in UK waterfront property instructions in the year to May 2023 vs 5-year average
Average premium for a waterfront property compared to non-waterfront
Percentage of cash buyers of UK waterfront properties in the past five years
*Source: Knight Frank Research.
What next for the UK property market?
September 2022’s mini-Budget, which contained extensive tax-cutting pledges, led to a spike in the cost of borrowing and the temporary withdrawal of mortgage products as lenders struggled to price them.
This knocked the UK property market off course and reduced transaction volumes. While that dip has continued, 2023 looks like being a solid rather than spectacular year for the UK property market.
We expect prime regional prices to fall by a few percent this year due to increased supply and the rise in borrowing costs, and waterfront property won’t be immune to this.
Waterfront property prices retreated by 2.5% between Q1 and Q2 2023, although wider economic sentiment has continued to improve the further that we’ve travelled this year.
Both the Bank of England and International Monetary Fund have revised up their forecasts and said the UK will now avoid a recession this year, although affordability will remain a key issue and the property market is extremely price sensitive in 2023.
Waterfront exchange split in the 12 months to May 2023
London
Regional
In 2023, Sydney retains the top spot in Knight Frank’s International Waterfront Index with a waterfront property generating a 118% premium on average compared to a non- waterfront home, down only marginally from 121% last year.
Trophy homes with views of Sydney Harbour Bridge and Sydney Opera House face stiff competition.
Sydney’s Antipodean neighbour, Auckland, sits in second place in this year’s rankings, with a waterfront home commanding a 58% premium.
European destinations including Monaco (42%), Cap d’Antibes (40%) and Paris (38%) complete the top five.
The scale of the uplift is attributable to supply and demand.
Frontline water access is a rarity in cities and protected areas of outstanding natural beauty.
Tight building restrictions will limit the availability of stock, whilst on the demand side, investors vie for such homes alongside second home purchasers, given their rentability as holiday lets.
With rarity comes resilience. The desirability of waterfront homes and the potential they offer as an inflation hedge alongside capital preservation is likely to see demand swell further given the current economic backdrop.
Appetite looks set to persist. Four of Rightmove Overseas’ 10 most searched terms in April 2023 were waterfront.
BY CHRIS DRUCE Senior Analyst, Residential Research
Cash buyers in pole position as demand for waterfront property remains strong
Despite the fading influence of the ‘escape to the country’ trend, demand for waterfront living remains strong, as buyers make lifestyle changes after the experience of successive pandemic lockdowns. With the end of the era of ultra-low borrowing during the past year, cash and equity-rich buyers have found themselves in a strong position. The percentage of cash buyers purchasing UK waterfront properties has averaged 54% in the past five years. This compares with 29% in the mainstream market in the same period.
UK waterfront property exchanges were up 11% in the year to May versus the five-year average, despite the Bank of England having now raised the bank rate to a 5%, its highest level since 2008 in a bid to contain inflation, with further increases expected. This will provide some insulation from downwards price pressure as supply levels increase from the depths of the pandemic, when the so-called ‘race for space’ combined with a stamp duty holiday led to fierce competition among buyers and tight availability. Despite moderating from pandemic highs, demand for UK waterfront property has proved resilient. UK waterfront viewings were up 3.7% in the 12 months to May 2023 versus the five-year average, and offers made increased by 1% in the same period.
Waterfront property continues to attract a premium too, in part due to the relative scarcity of supply relative to the UK’s total housing stock. The average premium for a UK waterfront property, compared with an equivalent home that does not offer the waterfront lifestyle, was 48% in the second quarter of 2023, according to the Waterfront Index.
The most popular location for a property based on average premium was next to a lake or loch, with an uplift of 71%. Second was coastal, with an average premium of 66% compared with an equivalent non-waterfront property, and third was estuary (64%). New instructions for UK waterfront property were up 37% in the year to May 2023 versus the five-year average and improved supply from a low base will see an increase in transaction volumes.
London Waterfront exchanges at five-year high
Rebased to 100 = 2019 (Year to May)
2019
2020
2021
2022
2023
Increase in UK waterfront property instructions in the year to May 2023 vs 5-year average
Average premium for a waterfront property compared to non-waterfront
Percentage of cash buyers of UK waterfront properties in the past five years
*Source: Knight Frank Research.
What next for the UK property market?
September 2022’s mini-Budget, which contained extensive tax-cutting pledges, led to a spike in the cost of borrowing and the temporary withdrawal of mortgage products as lenders struggled to price them.
This knocked the UK property market off course and reduced transaction volumes. While that dip has continued, 2023 looks like being a solid rather than spectacular year for the UK property market.
We expect prime regional prices to fall by a few percent this year due to increased supply and the rise in borrowing costs, and waterfront property won’t be immune to this.
Waterfront property prices retreated by 2.5% between Q1 and Q2 2023, although wider economic sentiment has continued to improve the further that we’ve travelled this year.
Both the Bank of England and International Monetary Fund have revised up their forecasts and said the UK will now avoid a recession this year, although affordability will remain a key issue and the property market is extremely price sensitive in 2023.
Waterfront exchange split in the 12 months to May 2023
London
Regional
In 2023, Sydney retains the top spot in Knight Frank’s International Waterfront Index with a waterfront property generating a 118% premium on average compared to a non- waterfront home, down only marginally from 121% last year.
Trophy homes with views of Sydney Harbour Bridge and Sydney Opera House face stiff competition.
Sydney’s Antipodean neighbour, Auckland, sits in second place in this year’s rankings, with a waterfront home commanding a 58% premium.
European destinations including Monaco (42%), Cap d’Antibes (40%) and Paris (38%) complete the top five.
The scale of the uplift is attributable to supply and demand.
Frontline water access is a rarity in cities and protected areas of outstanding natural beauty.
Tight building restrictions will limit the availability of stock, whilst on the demand side, investors vie for such homes alongside second home purchasers, given their rentability as holiday lets.
With rarity comes resilience. The desirability of waterfront homes and the potential they offer as an inflation hedge alongside capital preservation is likely to see demand swell further given the current economic backdrop.
Appetite looks set to persist. Four of Rightmove Overseas’ 10 most searched terms in April 2023 were waterfront.