Following Lonres's Autumn Report on the market it illustrated prime property performance as an investment asset over a 20 year period. They used a flat on Cadogan Square as an example, one of the best addresses in Knightsbridge. The flat was bought in 1991 for a measly £500k.
Following that the Cadogan Square property remained with the same owner for nearly six years until it was sold again in 1997 for £750k. In 2006 the property obtained a lease extension to 107 years and it sold once again – a year later – for nearly £3.4m. Its most recent sale was in November 2012 for £4.3m. Things really picked up after the lease extension, but even with a declining leasehold interest, the value of the property was seen to appreciate over a 14-year period.
The ups and downs in Knightsbridge have been charted alongside those of five other key asset classes (crude oil, gold bullion, fine art, the FTSE 100 and the S&P 500) over the same period. Stock market investments (both FTSE 100 and S&P 500) were shown to have higher yields in the short-term, but the PCL real estate example far outperformed both over the long-term. It also showed the most long-term stability.
Lonres also notes that PCL real estate appears to be able to outperform other asset classes with little effort (i.e. one need not do anything but simply hold on to it long enough to realise the desired return); despite all the variations in the the London real estate market, annual appreciation was achieved.
The diagram above shows a graphical comparison of the various assets performance against each other over a 20 year period.