Prime London prices remain bullish and rise by 2.5 per cent in last quarter

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.

South West London hots up as an attractive alternative to pricier boroughs

Demand for properties in the Fulham and Chiswick area has surged in recent months, according to local agents, with the majority of sales – 97 per cent, say some agents – going to sealed bids. The hottest sector of the market there is the £400,000-£800,000 price bracket, where most properties are attracting approximately 12 bids.

“We are experiencing a demand for both flats and family houses, with the majority going to sealed bids and selling at asking price or above,” said one local agent. “Within 48 hours of a property being listed, we tend to see at least a dozen viewings arranged, and most properties are selling in less than a week. The particularly high demand for homes within the £400,000-£800,000 price bracket can be mainly attributed to first time buyers who are now confident in the market, investors who want to enjoy good capital gains and strong rental yields – typically at around 4-6 per cent – as well as Trust funds looking to secure property in the local market.”

There are reports of an increase in wealthy Chinese and Russian buyers in Fulham, seeing it as an alternative to Kensington and Chelsea – they realise that the amenities and transport links are equally as good as the pricier boroughs, so deem it a better investment.

These buyers tend to be looking for flats with two to three bedrooms at a price bracket of £500,000-£700,000. This will get them a flat of approximately 850 square feet, which would cost anything from £1.5m-£3.5m in Prime Central London.

Boris’s vision for London a shot in the arm for its property market

Mayor of London Boris Johnson has outlined his agenda to secure London’s future as the best big city in the world, a reassuring sign for property buyers that real estate in the city represents a secure long-term investment.

To mark the publication of his ‘2020 Vision – The Greatest City on Earth; Ambitions for London’ this week the Mayor addressed an audience of business leaders, government representatives and key London employers on the challenges facing the capital, not least that London’s population will hit ten million by 2030. London also needs 400,000 new homes in the next ten years alone.

Advocating the need for stable and continuous investment in housing and infrastructure projects in particular, the Mayor highlighted that the capital now contributes a greater share to the UK’s economic output than any point in its history and its future prosperity, and that of the whole country, is reliant on hardworking Londoners.

Highlighting emerging opportunity areas across London, including Battersea, the Royal Docks, Greenwich, Tottenham, and Croydon, amongst others, the Mayor talked of the need to invest in Crossrail Two, together with new tube extensions and river crossings.

Said Mayor Boris Johnson: “Post-Olympic London has an amazing story to tell of a city that is leading the UK out of recession as the best place to work, live, play, study, invest and do business, and my goal is to lengthen London’s lead as the greatest city on earth. In the summer of 2012 this city put on a triumphant performance, showing us exactly what we can do if we focus and plan, and agree on the challenges facing our city, and today is my personal view of how we can work together to meet those challenges.

“To succeed we must recognise the test of our mettle that lies ahead, not least a million more people in the next decade and a vast shortage of homes in an uncompromising global economy. This shows us why the government must invest in London’s future for the good of the whole of the UK and exactly why we must continue to attract international investment. I want this vision to be one which sparks the imagination of every Londoner as well as business leaders and government officials. This is everyone’s city and all of our futures.”

 

London’s young population and high prices increasingly make it a city of renters

New research by a leading estate agency shows that almost half of London’s population now rents their property compared to a national UK average of 30 per cent, and there has been an 80 per cent increase in the number of private tenancies over the last decade, with most of the increase occurring since 2005.

At 36 per cent, London’s proportion of residents aged 20-40 years old is relatively high, said Cluttons who conducted the research, adding this same group accounts for the strongest demand for rental accommodation. Inward migration to the capital, a reduction in the average household size and the obvious cost barrier to owning a London home are also significant drivers for the rise in the number of rented homes in the capital.

London’s greater concentration of higher education institutions, international students and a lower provision of university accommodation in comparison to the rest of the UK, have all contributed to the increase in rental demand too.

“Younger people are choosing to rent for longer periods, especially if they plan to stay in the capital only for a few years, or wish to live centrally, thus avoiding long commutes from outside London,” said Cluttons. “Given the high cost of getting that first foot on the property ladder, many of them are unsurprisingly unable to commit to buying and are forced into renting.

“The idea of renting long-term is now seemingly universally accepted, partially due to a sea change in attitudes. We are seeing a rise in the number of relatively affluent parents who are happy to bring up children in rented homes delaying a move into owner occupation, something that was uncommon until recent times.

“There is a growing differentiation between those that put a high value on proximity and amenities when choosing where to live and those that react to rising housing costs with soul searching over lifestyles that are prepared to compromise on accommodation, in order to keep living costs down.”

Renting in London is almost equally divided between the private and social sectors, with a quarter of households renting privately and 24 per cent paying below market rents to social housing institutions. In contrast, the number of people who own their own homes or rent from a local authority or housing association has stagnated or declined.