The prices of prime central London properties have risen by 20% for landlord insurance holders over the past twelve months up to the end of March 2010, according to research by Knight Frank.
The report found that prices were not only now increasing at their fastest rate since March 2008, but that current prices are now just 9% off their March 2008 peak. It also found that growth had been predominantly fuelled by the middle and lower ends of the central London market, with the sub-£2.5m sector seeing the strongest growth of 23%, compared to 17% for the £5m+ sector, showing that the recovery in prices began later at the more expensive end of the market.
Head of residential research at Knight Frank, Liam Bailey commented: “The central London market has enjoyed boom-like conditions in recent months, at least in terms of prices”, adding that the degree of growth was not, however, consistent across the period. Indeed, it is thought that the price boom may already be slowing.
Bailey conceded that “the rate of price growth in March, at 0.7%, represents the slowest monthly rate of growth since last April, and suggests that price growth is beginning to slow on the back of higher supply and slightly weaker demand in the market.” He added that “the balance between purchasers and vendors, has become more even in recent months,” explaining that a combination of more properties being put up for sale given rising prices and more prospective buyers holding back as they awaited the budget and election, may be the cause of the slowdown.
International demand contributed significantly to the market’s revival despite London dropping behind New York as the “leading global city” in Knight Frank’s recent World Cities Survey, with Bailey observing that “international demand… appears to be rising not declining at the current time.” 45% of property purchases of over £2m were by foreign buyers. According to the recent Knight Frank Wealth Report, 49 nationalities bought residential property in central London in 2009.
Bailey added: “The rapid growth in London’s pricing, reflects not only the stimulus given to the market from low interest rates and the weak pound – which have driven domestic and international demand – but also to very thin supply over the year, set against very healthy interest from buyers.”