Growth slows in prime central London

Prime central London (PCL) growth slowed to just 2.5% in the first six months of this year and values now appear to have now plateaued having risen by just 0.4% in the second quarter of the year.

The most established core prime central locations such as Mayfair, Knightsbridge, Belgravia and Chelsea, where average values are in the £2,100 to £2,400 per square foot, have all recorded quarterly growth below 1.0%, while in lower priced Marylebone, where prices average £1,600 per square foot, values rose 3.5% in the quarter.

Meanwhile, at the very top end of the market, homes worth over £10 million fell by 1.5% in the second quarter of 2014, meaning that London’s highest value homes saw zero growth on an annual basis albeit values remain 48.0% above peak.

This division is also reflected in sales activity, with sales between £5 million and £10 million in the first six months of the year up by 7% on the same period in 2013 but sales over £10 million down by -10% over the same period.

Click the table below to enlarge

Full of eastern promise

The strongest growth is now being seen in the lower value core prime markets of Islington (prime north) and Canary Wharf and Wapping (prime east of City), reflecting confidence amongst young financial sector employees and investor buyers targeting City based renters. For example, average values in the prime East of City markets have risen 10.1% year to date, which follows 13.3% growth in 2013.

In the south west

The domestic markets of prime south west London, which beat all other prime markets to rise 14.0% last year, have also slowed. In the face of buyer resistance to further price inflation and higher stock levels, year to date growth stands at 4.4%, having slowed to just 0.4% in the past three months.

Across the prime London index, approximately one in four properties recorded small price falls over the last three months. This suggests the spectre of interest rate rises, and in some parts of the market more constrained mortgage lending, is beginning to impact on buyer sentiment and constrain prices even in markets rich in equity.

Click the graph below to enlarge

Outlook

With an election approaching and the taxation of high value property still on the political agenda we expect values to plateau in locations that have seen the steepest price rises as buyers apply the brakes on further increases for a period. New sellers entering the market should price for these new market conditions and a more cautious group of buyers.

Click the table below to enlarge

Taken from
Market in Minutes: Prime London Residential Markets - July 2014