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News: Prime London houses prices now 12% above peak

Thu, 07 Jun 12

The price of prime London property is now 12.1 per cent above the previous peak in March 2008, according to Knight Frank.

The capitalís real estate values increased 0.7 per cent in May, marking a year-on-year rise of 10.7 per cent, the firmís latest research reveals. Prices have now jumped by 47.3 per cent since the market low in March 2009.

Liam Bailey, Knight Frankís Head of Residential Research, comments: 'Last October we forecast that 2012 would see an additional 5% growth in prices. Just five months into the year, we have already seen 4.7%. Unsurprisingly the key question from clients is whether we are overdue an upgrade to our forecast?

 

'Among all the issues impacting the market, two are of critical importance: the new stamp duty rate of 7% for £2m+ properties, and the associated uncertainty surrounding company purchases and the Eurozone crisis.

'The early evidence is that the market has absorbed the 7% stamp duty rate fairly well. Price growth in the two months since the Budget change has been slower in the £2m+ sector than the sub-£2m bracket, 1.6% as opposed to 2.7%, but it has remained positive.

 

'Sales volumes and new applicants in the £2m+ sector were broadly flat in April and May, down 1% and 2% respectively on the same period in 2011. Looking at the second issue, while our forecast was based on an assumption that the Eurozone would remain unified, we did assume that growing tensions would continue to drive flight capital into the London market, especially from the Eurozone periphery, and this is precisely what has happened.

 

'While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year - those who had the funds to buy have done so - we are now seeing a noticeable up-tick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market.'

 

Rupert des Forges, Partner, Knight Frank Knightsbridge, notes several recent examples of the investment trend: 'Recent weeks have seen an even greater influx of European buyers looking to purchase property in the Prime London market - a Ďsafe havení market.

 

'Europeans are focusing on securing Prime London property residential assets as a method of defensive wealth preservation. We have several recently sold examples including two substantial flats in a premier Knightsbridge block with asking prices in excess of £15,000,000.

 

'The purchaserís objective was to secure them and use them as long term rental. Other examples include sales where existing European owners have upgraded from pied à terres to family homes. We have also seen a sharp rise in interest from French investors looking to move quickly before Hollandeís newly proposed wealth tax.'

 

Bailey continues: 'If  the crisis in the Eurozone leads to a break-up, will this flow of funds continue to London? The final form of a break-up will dictate that. Any country which seems at imminent risk of ejection is likely to see a massive outflow of capital, some of which will end up in bricks and mortar in London. But if we are left with a small core around Germany, the value of that smaller blocís currency is likely to surge against Sterling, reducing demand from those countries.

 

'The knock-on economic impact on the UK, and the global economy, means London would be caught between weaker economic conditions and a desire from investors for safe assets. Though there is scope for further growth, for the moment we are leaving our 5% growth forecast of the whole of 2012 untouched.'

 

See also: London House Prices

 

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