Growth in London’s prime property market slowing
31-07-2012
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Its July 2012 report also shows that overseas buyers have remained committed to the very best central locations, accounting for 58% of buyers in the first half of 2012.
Though limited in supply, sales of new build property tailored towards the needs of high net worth overseas buyers have been particularly strong.
In central prime London growth slowed to just 0.4%. But the figure masks a divergence between areas. Prices in Chelsea, Mayfair, Belgravia and Knightsbridge rose by over 1%. Those in Marylebone, Notting Hill, Kensington and Holland Park fell marginally in the quarter.
According to Lucien Cook, director of Savills research, this reflects how different parts of the market have reacted differently to key market drivers.
‘Buyers looking for safe haven investments have underpinned demand. But there has been a general lack of urgency among other buyers because of uncertainty over both the global economic outlook and the effect of the stamp duty and associated tax changes introduced in the budget,’ he explained.
But in the higher price bands the effect of this increased tax burden has had less of an effect. There were more than 100 sales of £5 million plus residential properties in the three months to the end of June 2012, the total value of which exceeded £1billion in a quarter, for only the fourth time in the past five years.
‘Sales of new build property tailored towards the needs of high net worth overseas buyers have been particularly strong. In the last quarter, they accounted for 15% of these £5 million plus sales. International demand is less of a market driver in other prime locations and this has resulted in a slower, but less volatile recovery to date,’ added Cook.
Price growth in prime South West London exceeded that of central London in the second quarter but it slowed to 0.9%. Cook said that was in response to the general uncertainty in the UK economy and specifically the banking industry due to ‘the extent to which demand is driven by domestic family buyers employed in the business and financial services sector’.
Similarly, in the prime markets of North London, prices rose by 1.6% in the quarter but show growth of just 3.9% year on year. Cook added that there has been little evidence of bonus money in either of these markets since the credit crunch.
‘Price growth has been driven by the injection of housing equity from central London, as buyers move along London’s wealth corridors and existing equity that has been recycled as families have been reluctant to move into the commuter zone,’ explained Cook.
‘Though there has been less use of the offshore ownership structures that were specifically targeted in the last budget in this market, the increase in the general rate of stamp duty has created a price threshold around £2million in these markets,’ he added.
