The bounce in prime central London values has continued in the third quarter of 2009, according to Savills Research. Their index of prime central London property prices rose by 4.0% between June and September this year, following a similar rise in the second quarter. Stock levels are 20% to 30% lower than the medium-term average across all London’s prime markets, but demand has also increased.
Highlights of the Savills Research Q3 indices:
• Prime central London showing significant growth: +4.0% from July to September, building on Q2 growth of +4.3%
• Prime south west London growth at a pace last seen in the first half of 2007, with values up +8.4% in the quarter, following +6.4% growth in Q2
• Prime central London flats grew by +4.8% and houses by +3.0%, the first time flats have outperformed houses since Q4 2008
• Core prime markets of Mayfair, Kensington, Chelsea, Belgravia grew +6.1%, but are still valued at -20.2% off peak
• Ultra prime markets, where values average circa £15 million, grew just +0.9% in the quarter
Says Barnes, “This growth is caused by very low levels of supply failing to meet an increased level of pent-up demand, predominantly from cash buyers or those with very high levels of equity to spend.”
Looking forward
With more stock likely to come to the market as the potential sellers seek to tap into the strongest market conditions for two years, the imbalance between supply and demand which has driven this price growth will ease. This is anticipated to take some of the pressure off prices.
“Depending on shifts in underlying economic conditions, prices are expected at best to level out again and may fall back somewhat”, says Barnes. “However, we expect the south-west and central London markets to continue to perform differently to each other. Demand levels will probably prove more volatile in the central markets due to the discretionary nature of buyers. Meanwhile, steady, family needs-driven demand in the south-west should prove more stable, though slightly more vulnerable to affordability issues, and more exposed to interest rate rises. Having said this, it is clear that all prime markets will continue to be equity-driven and less prone to the problems of mortgage lending than the mainstream UK markets.”