A strong recovery in the prime central London housing market over the past seven months has taken even the most optimistic observers by the surprise. Today, prices are 8 per cent higher in the British capital's most des res areas than in March 2009, figures from estate agency Knight Frank shows.
This rise has been helped by a 2.1 per cent increase in October the company's latest research reveals.
Following six months of strong overseas demand, British buyers came back in large numbers in October.
Liam Bailey, head of residential research at Knight Frank, said values had risen most strongly in the prime central London districts of Kensington, Chelsea and Notting Hill - up 10 per cent since March.
Prices rises have rippled out to other parts of London, including prime areas of Richmond and Islington.
“Prices have done much better than people expected, because there isn't much stock in the market and buyers have come back, because they've felt confident, thinking that London's economy is beginning to turn round,” Mr Bailey said, “The weak pound has encouraged overseas buyers to come back into the market place and the feeling that prices were over-discounted at March this year.”
Mr Bailey said two-thirds of buyers of GBP5 million-plus homes were British, in October, up from two-fifths in the preceding three months. British demand was driven up by the return of City of London buyers to the market he said. City bonuses are being paid again and the stock market has risen in value by 50 per cent since March 2009.
Wealthy foreigners have flocked to London since the spring when prices were 50 per cent below their late 2007 peak in US dollar terms. Buyers include the first mainland Chinese to invest in London's property market.
“European, Middle East and even American buyers are very prominent,” Bailey said, “Hong Kong buyers tend to be more noticeable among investment purchasers, and we've seen, for the first time, mainland Chinese purchases in London.”
He said Chinese buyers wanted property either as an investment or as a place for their children to stay while studying in Britain.
He said a continued lack of supply coupled with strong overseas interest would support prices over the next twelve months. After a quiet period in the market during the autumn, he said prices may edge up 5 per cent in 2010.
“The lack of properties available to buy in the market means it is going to feel quite subdued overt next few months,” he said, “we will have to wait for (next) spring when we are hoping to get more properties back into the market.”
After forecasting a recovery in the prime central London market last spring, Camilla Dell, managing director of buyer agency, Black Brick, is uncertain it can be sustained. Much of the increase in buying activity during the spring and summer was fuelled by the release of pent-up demand from cash-rich Britons living in rented accommodation who wanted a home of their own, she said.
“We are slightly surprised that the numbers are what they are, that we have had such big price growth” she said, “We are hesitant to say this signals a recovery. If we see a lot more supply coming onto the market then we won't see this level of growth continue.”
She considered the national property market may suffer over the next year or so if the economy worsened, but that prime central London's housing sector may be less affected.
“In second quarter of 2010, unemployment is expected to peak at 3 million, so we could see price falls,” she said, “But London is a different animal to the rest of the UK. It will always attract international investors and buyers.”
Ms Dell advised buyers not to delay making a purchase in the expectation that prices might fall again.
“If you can find the right property at a good price then it is worth doing,” she said, “Buyers become too obsessed with price. Buying property in London ought to be seen as a long term thing, because it has a proven track record of attracting international investment.
London's biggest private landlord, Bruce Ritchie, chief executive of Residential Land, which owns 1000 homes in the British capital, is confident London's best addresses will ride out any economic turbulence. He expected investment returns to rise over the next year or two, especially for the best quality homes.
"For a yielding asset the path is only upwards from its current lows,” he said.
Big houses on sale include, 23 Cadogan Place, a GBP26 million city mansion marketed by Savills. This Knightsbridge property has five bedrooms, cinema room, swimming pool, staff accommodation and four terraces.
Islington's emerging prime market was lifted by the official opening of Highbury Square on September 24th. The site, the former Highbury stadium of Arsenal Football Club, was redesigned as 650 apartments and penthouses, and will be completed later this year. Eighty flats remain unsold with prices for a two bedroom penthouse starting at GBP995,000. Sales agents, Savills.
In Paultons Square, Chelsea, a four bedroom, two bathroom period townhouse with several reception rooms, home cinema and garden is on the market through Knight Frank for GBP7.25 million.
At the Barbican in the City of London, former commercial premises have been converted into Frobisher Crescent, a set of 69 apartments, with a three bed home costing GBP1.875 million.
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