“… prime central London property is showing signs of recovery
Talk about tempting fate but that dreaded phrase, ‘Green shoots of recovery’, is being bandied around the UK housing market with increasing regularity following modest rises in prices and activity in a slew of official data. Prime property in London is starting to experience the same positive shift in sentiment.
In its latest research, Knight Frank reports that prices in posh parts of the capital rose 1.6 during May on the back of a 0.4 rise in April.
Properties in the sub-£1m bracket have now risen 2.7 since March and are leading the recovery in prices. Demand appears to be strongest in Mayfair and Marylebone, where prices have risen 2.9 and 2.7 over the same period.
This apparent upturn needs to be put into some context for, as Knight Frank’s prime central London index also shows (see table), prices are still down 22.3 from the March 2008 peak. Even so, as the firm’s head of residential research, Liam Bailey, points out, those very same sharp falls in values are tempting overseas investors back into the market – particularly those armed with US dollars or euros who can exploit the weak pound.
The May figures, he says, reflect steadily improving conditions in a market that is ‘unrecognisable’ from the gloomy London of just six months ago. Don’t mention City bonuses but, as Bailey observes, ‘We have even seen some bankers back in the market after a noticeable absence.’
London’s high-end residential market is an interesting work in progress right now. There remains little of the frustration over mortgage lenders cutting off the money supply to the mainstream house market. And gratifying though it is that the Bank of England cuts or holds interest rates, it is of marginal influence.
But prime property does reflect the health of the London economy, as well as investor sentiment towards the UK from overseas. Knight Frank says that in the £10m-plus sector – where much overseas money was deposited in the boom years – the recovery has been slowest with prices just 0.8 higher over the past three months. But Bailey suggests this sector is starting to get busier with Russians who have managed to retain their wealth keen to place their cash in London’s best locations.
The same is true of investors from the Asia-Pacific region, reports King Sturge. In another echo of the boom years, the firm has made several trips to Singapore, Hong Kong and Malaysia, marketing developments such as St James Urban Living’s Silkworks in Lewisham and Galliard Homes’ City Peninsula in Greenwich. Such locations are hardly prime London, but nevertheless the firm claims to have generated 188 sales at these and other similar schemes since March. This Far Eastern haul is worth £54.5m.
The overseas investors are showing some faith in London, although the capital must still carry a health warning. Market activity is still very low compared with the turnover of the boom, which makes the data less than wholly reliable. And there are often false dawns in the housing market as the wider economy struggles out of recession.
Perhaps the best indicator of London’s change of fortunes comes not from Russia or Asia but the news that Berkeley Group has paid more than £20m for a development site in Belgravia, as revealed by Property Week last week.
Berkeley managing director Tony Pidgley has an enviable reputation for calling the market correctly, and this is a significant deal. But this is a development site – one for the future. Pidgley is not punting Belgravia now but a year or two down the line. There will be a few more lurches in prices and dips in confidence before Berkeley actually tests the market with a flat for sale.” (Doug Morrison, Property Week). http://www.propertyweek.com/story.asp?sectioncode=530&storycode=3143188
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