Prime London buyers separate the best from the rest
London’s prime residential markets, which have been the strongest performing residential markets over the past five years, recorded a second successive quarter of muted price growth according to new analysis from international real estate adviser, Savills.
“Despite some high profile sales, heightened uncertainty in the eurozone and a cautious response to changes in the tax regime for high value property has caused the heat to come out of the market albeit without leading to price falls” says Lucian Cook director of Savills research.
Price rises averaged just 0.5 per cent in the three months to the end of September. This follows a 0.9 per cent uplift in Q2, and sees annual growth slow to 5.1 per cent down from 9.1 per cent a year ago.
Best outperform the rest in prime London table
“Detailed analysis of the index suggests that it is increasingly the best in class of prime London homes that are underpinning average price growth,” says Lucian Cook. “In prime central London, where prices rose by 0.8% in the quarter, only a third of properties showed any price growth in the past three months. Just over half remained flat and around a tenth showed marginal price falls. By contrast, the best performing ten per cent of properties saw prices rise by 3 per cent or more.”
Only three areas – Chelsea (10.5%), Knightsbridge (9.6%), and Belgravia (8.3%) - are still seeing annual price growth approaching double digits. This reflects the fact that they are the most established core prime central London locations which are firmly on the radar of the international super wealthy.
Chelsea had a standout quarter, recording the highest price growth of any location at 2.2 per cent. Together with South Kensington, it benefitted from interest from French buyers in a flight from eurozone woes and the threat of punitive taxes at home, giving a real boost to the best addresses.
Areas dominated by domestic buyers saw only marginal quarterly growth, and while annual growth has been more or less in line with the prime central London average, prices exceed the peak of 2007 to a much lesser degree. This is a clear reflection of far lower levels of bonus money entering the market.
What this means in the short term
“The Olympics undoubtedly contributed to slower market activity in the last quarter, and as a result across the prime London markets we have seen a rise in stock over the summer months. Looking forward, the outcome of consultations on the taxation of high value property will be important to international demand, while the pace of London economic recovery will dictate sentiment amongst domestic buyers. Evidence to date suggests that while viewing levels have picked up this month, buyers are now slower to commit and want to be sure of value,” says Cook.
“This indicates little price inflation in the short term, though we expect properties that are priced according to current market conditions will continue to sell.”