Price growth in London property starting to slow

Knight Frank's Prime central London index revealed a new high in June, but with values almost 50% higher than they were in March 2009, the rate of price growth is beginning to slow

Related topics:  Legal
Amy Loddington
2nd July 2012
Legal
Liam Bailey examines the latest data:
 
“Over the past three years, the central London market has stood apart from the wider UK market, with surging prices and demand growth.
 
“Our index confirms that £1m invested in central London property in March 2009 would now be worth approximately £1.48m. This growth equates to an average monthly appreciation of £12,400, or £407 daily.
 
“The above calculation assumes the original purchase was made in sterling. With over 50% of prime central London purchases being made by overseas buyers, the impact of currency exchange rates is a relevant factor for investors. The headline of 48% price growth since March 2009 would, in effect, have been 70.3%, 62% and 62.1% respectively for a buyer converting funds from Euros, US dollars or Hong Kong dollars, as sterling strengthened over the intervening period.
 
“Some market observers have questioned whether this strong price growth will continue. Over the past few years international buyers have seen London property as a safe-haven investment in an increasingly volatile global economy.
 
“Evidence of this is the fact that while European (non-UK) buyers averaged 10% of the £2m+ central London market between 2005 and 2010, the same figure for 2011 and 2012 to date is 20%. Greek buyers led the charge last year and 2012 has so far been led by Italian and French interest, with a growing number of Spanish and even German buyers.
 
“While the safe-haven factor continues to support the market, we are beginning to see resistance from buyers to on going price increases and the difference between asking and achieved prices are beginning to widen (the percentage of the asking price achieved fell from 96% in March to 92% in June).
 
“In October last year we forecast 5% growth in prices for the whole of 2012. With 5.5% growth already, we do not expect to see a significant additional uplift during the remainder of 2012.”

Russell Quirk, founder of low cost online estate agents, eMoov.co.uk, said:

"While most of the UK property market succumbs to economic logic, London's continues to defy it. The outperformance of the London market has more to do with the capital's perceived status as a hedge than it does with any intrinsic strength. While correctly priced properties can fly off the shelves, too many, unfortunately, come to the market overpriced.Throw in weak demand and weak-kneed lenders and you have all the ingredients for a stagnant market.
 
"The first half of 2012 has been indifferent, the second half is teeing up to be much the same. Until forward momentum in the economy returns, the property market overall will continue to bump around from one month to the next with no discernible direction. Thankfully for homeowners, supply is even weaker than demand, which is preventing prices from falling further."

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