UK Property - Prime central London properties show resilience against darkening skies
- January saw prime central London property prices grow by 1.1%; the highest monthly rate since the credit crunch began to build in September 2007
- On an annualised basis the market continues to slow with growth of 26.2% in the year to January. This compares to a rate of 37.9% in August last year
Liam Bailey, Head of Residential Research, Knight Frank says:
“While a gradual slow down continues to take its toll on the main housing market, properties in prime central London appear to be proving resilient against the background of continued economic uncertainty.
“Figures for January show that on a monthly basis prices for prime properties in the capital have grown by 1.1%, a slight increase on the previous month and the fourth consecutive month in which there have been signs of modest growth.
“Despite a good result for January the annualised growth rate continues to slow with an inflation rate of 26.2%; a marked decrease from the figure of 37.9% recorded at the height of the market last August.
“As this market depends to a very great extent on the strength of the City it is inevitable that the current unease in the financial sector is influencing its slowdown. However, it is clear that city money is still being invested in prime central London properties, though perhaps not with the same enthusiasm that followed last year’s bonus round.
“This is explained in part by recent survey evidence showing bonus pools have been much reduced and that city workers are far less likely to spend the bonuses they will receive. Even so the worst case predictions of significant cuts in headcounts do not yet appear to have materialised.
“It is fair to say that the issues of confidence and affordability that have so far dogged the main market may now promote a more cautious purchasing environment in the prime sector too.
“We are sticking by our forecast of 3% price growth overall in prime central London in 2008 despite the resilience shown in January. A view endorsed by an emerging belief that the Bank of England’s ability to introduce lower interest rates in the second quarter may be compromised by growing inflationary pressures.
“Should the economic downturn continue we may well see redundancies in the financial services sector. If this were combined with an exodus of foreign non-dom HNWIs anticipating the government’s recently announced tax changes for ‘non-doms’ then dark clouds may yet gather over London’s prime market.”
Courtesy: Knight Frank Residential Research
Knight Frank area definitions
Prime central London is taken to include: Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank (from Westminster Bridge to Tower Bridge/Shad Thames)
Prime London is taken to include all the above plus: Canary Wharf, Hampstead, Richmond, Wandsworth, Wapping and Wimbledon.