In the housing markets of prime west London, an area starting in Hammersmith and heading west to Ealing, price growth outperformed the prime London average. Average values increased 4.1% in the second quarter of 2015, leaving annual growth at 0.5% compared to the small falls seen in other prime London markets.

At the top end of the market, buyer caution has been evident. The value of properties priced over £2 million, the majority of which are concentrated in Hammersmith and Chiswick, fell 2.2% over the past year. The price falls largely resulted from stamp duty changes announced in the 2014 Autumn Statement and uncertainty surrounding a mansion tax in the run up to the general election.

Stronger growth was recorded in the lower value markets, particularly in the £750k to £1 million market where buyers benefited modestly from the stamp duty reform. In the prime markets below £750k, although price growth was positive, it was slower as new mortgage regulations limit the amount buyers can borrow. Average values in Ealing are around 25% cheaper than Hammersmith and Chiswick and consequently saw the strongest growth, of 3.9% over the past year.

Since the election some of the deferred pent up demand is beginning to flow back into the market, although the new stamp duty rates are still keenly felt by buyers at the top end of the market. This has restricted any significant increases in both prices and transaction numbers and we expect this to continue over the rest of 2015.

Nonetheless, we are forecasting price growth to return to the market in 2016 and values to rise by 22.7% over the five years to the end of 2019.

Source: Savills Research

Source: Savills Research

The rental market

In prime west London, average rents increased by 1.2% over the three months to the end of June, leaving rental growth flat on an annual basis.

Nonetheless, corporate relocations play an important part in the west London prime rental market and are a growing source of demand. Over the first half of 2015, 67% of tenants were renting due to employment relocation compared to 55% in 2014.

Over the next five years, the London economy is forecast to continue strengthening, particularly in the technology and telecommunications industries, which will underpin demand for prime rental property over the medium term.

A potential risk to the sector is the level of new stock being brought to the market by overseas investors in certain locations on the fringes of prime London. In west London the largest prime development region is White City, which may lead to rents coming under pressure in the surrounding areas.

Nonetheless, across the prime London markets as a whole we expect rents to rise by 17% over the course of the next five years.

Source: Savills Research

Source: Savills Research

NB: These forecasts apply to average values in the second hand market. New build values may not move at the same rate