The prime London residential market has recorded stronger price growth in the past three months than at any time since March 2012, defying expectations that values would flatline this year, according to the quarterly index of a leading London property agency.
Across prime London prices rose 2.5 per cent between April and June, bringing annual growth up to 6.6 per cent from 5.5 per cent at the end of the first quarter. But, says author of the index Savills, there are significant differences in performance between locations and price bands that reflect differences in buyer profiles, reasons for purchase and their perception of the market, with evidence that some market segments are now looking fully valued.
The strongest growth was seen in the predominantly domestic markets of prime South West London (running from Fulham to Richmond and Battersea to Wimbledon), where values rose 3.2 per cent in the last quarter. Annual growth now stands at 8.5 per cent, much higher than the 4.4 per cent seen in prime central London. Despite reduced city bonuses, these markets are benefiting from wealth accumulated prior to the downturn, new wealth creation, especially from West End hedge funds, and increased buying activity from international buyers working and resident full time in the capital.
By comparison, prime central London values rose by 1.6 per cent in the quarter and 4.4 per cent year on year, according to the index. Here, price growth has become concentrated in the very core locations of Mayfair, Chelsea, Belgravia and Knightsbridge, which are the primary focus of new global wealth.
Evidence suggests that other central London markets have remained more reliant on world money and price growth has become more subdued. Locations such as Kensington, Holland Park, Notting Hill and St John’s Wood have been more sensitive to the effect of stamp duty changes for properties over £2 million than the core central locations.
Meanwhile, properties worth over £10 million have outperformed to date, to stand 38 per cent above their previous peak. While values appear to have plateaued for the time being, although transaction levels remain robust.