2013 Forecast: Prime London house price growth to slow

London’s property market will see price rises slow rather than stop in 2013, according to estate agent Marsh & Parsons.

They forecast that prime London house prices will rise by 3-5% in 2013, compared to 11.1% in the last twelve months[1], with the majority of the growth to come in the early part of the year.

Peter Rollings, CEO of Marsh & Parsons comments: “We’re not going to see the spectacular price rises seen in the past couple of years, but London’s prices aren’t going to completely flatline. 2012 started incredibly strongly, and we expect a similarly strong spring market to provide the main thrust for annual price rises as buyers return to the market after Christmas. Interest rates aren’t likely to rise next year, and this will keep a lid on forced sales, holding back overall sales activity in the year, but keeping competition high enough to sustain house prices.”

“I don’t foresee demand dropping significantly. The financial angst in countries like Spain and Portugal isn’t going to dissipate in the next 12 months and when you consider the number of wealthy French nationals reassessing their options following Msr Hollande’s tax policy, European buyer numbers will continue to play a key role in price growth.”

Prime Market Segmentation

Peter Rollings continues: “The 7% stamp duty tax reduced competition for homes valued between £2m and £5m this summer, with most activity coming from purchasers of properties worth less than £2m or more than £5m. But there are tentative signs that buyers are getting used to the higher tax, and the next year may see more buyers become accustomed to the levy, viewing it as simply a cost of moving. Nevertheless, in the prime market, we expect the main momentum to be up to the £2m bracket as the City jobs market affects budgets.”

Rental Market

Average rents in the prime areas of London have fallen by 2.8% in the year to date, driven by softening rents for properties marketed for more than £2,000 per week.[2] However, the more buoyant sub £1,000 a week market has seen a much stronger performance, with annual rises of up to 15% in many areas where would-be buyers are forced into the rental market by a historically low supply of both mortgage finance and property to purchase. Based on current trends, Marsh & Parsons expect rents in this segment of the market to rise by a further 8-10% in 2013.

Peter Rollings comments: “2012 was a mixed bag for the rental market in prime London. Rental growth has been muted at the top end of the market following the disrupted summer and anxiety among city firms. But at the other end of the spectrum, property up to £1,000 per week has been performing well, and will be a key driver for any rental inflation next year, especially south of the river in areas like Clapham, Balham and Battersea.

“While the supply of rental property has increased in the most traditional central London hotspots, the same can’t be said for other prime areas. For instance, south of the river, while supply remains constrained, rental demand is climbing in and around the commons as tenants are attracted by the great transport, lower council tax and lower rents compared to prime central London. With competition heating up, void periods are falling, and prospective tenants are often involved in bidding wars. At this rate, rents in these areas will see double digit growth in the next 12 months.”

[1] Annual price in Q3 2012 in the prime parts of London, according to Marsh & Parsons’ latest Prime Market Monitor

[2] As of November. Based on a repeat valuation of a robust basket of rental properties in the prime areas in which Marsh & Parsons operates.


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