Prices rise by £383 per day in prime Central London

• Prices in prime Central London rose by 2.3% during Q1
• Average price of a flat breached £1 million mark for the first time
• Average price for prime residential property reached new historic high of £1.53m
• Prices expected to rise by 22% over next five years

Home owners in prime Central London are currently benefitting from price growth of £383 per day, the equivalent of a return air fare to New York City or Dubai, reports property consultant Cluttons in its Residential Investment Monitor Q1 2013, published today.

Following a slowdown in both the sales and lettings markets during Q4 2012, the prime Central London residential market has turned a corner, with positive growth recorded across all London regions. Values rose by 2.3% during the first quarter, taking the annualised increase to 6.8%, just ahead of the long run average of 6.7% per annum.

Consequently, the average price of a flat in prime Central London breached the £1 million mark for the first time, while the average price for prime residential property as a whole reached a new historic high of £1.53 million in Q1, leaving prices 6.1% above the previous market peak of Q3 2007. This translates to an average increase of £383 per day.

The best performing London region was Central North West, incorporating St John’s Wood, Hampstead, Maida Vale, Regent’s Park and Highbury & Islington, which showed price growth of 4.5%, pushing values above the £1.5 million mark for the first time. Central West on the other hand, incorporating Hyde Park, Notting Hill, Kensington, Holland Park, Mayfair, Paddington and Marylebone saw the smallest increase of 1% over the quarter, which pushed average prices to £2.36 million.
Sue Foxley, Head of Research at Cluttons, said: “Prime Central London is once again experiencing robust price growth, driven primarily by the supply drought and strong domestic demand, aided by a greater take up of the historically low mortgage rates. To access property while also securing long term capital value growth, buyers are looking to the edge of core locations with good transport links such as Clapham, Highbury and Canary Wharf, which in turn are benefitting from upward pressure on prices.

“The prime London market appears to have successfully withstood the worst of the economic turbulence and continues to outperform the rest of the UK, albeit with relatively subdued levels of growth when compared to the years leading up to the recession.”

Prime Central London house prices are expected to rise by 22% over the next five years according to Cluttons’ forecasts.

Raid on ‘piggy bank’ homes boosts supply of smaller properties

Owners of pieds á terre and smaller Central Londonapartments are beginning to sell up in order to monetise their assets, reports property consultant Cluttons. This is boosting the supply of smaller properties such as one-bedroom apartments and studios at the lower end of the market.

Many of these homeowners in prime Central London have benefited from considerable capital growth and in many cases owners have been pleasantly surprised to find out the current value of their second homes. Sales of such properties are in many cases helping provide a financial cushion to those who have lost their jobs or seen a considerable reduction in income. Owners wishing to upgrade their main residence realise that the sum they can now achieve for their pied á terre could make a real impact on their budget.

In addition, investment savvy owners with buy to let properties in prime locations are selling up and reinvesting the cash in areas which they feel have greater growth potential, for example, selling in Shad Thames and buying a new investment in Wapping, or selling in Maida Vale and buying in Kensal Rise. Studios and one bedroom properties are in some cases generating low yields in light of new high values, and are unlikely to rise beyond the £500,000 price bracket. Consequently, owners are opting to sell while prices are strong and buy into an area where they will receive a stronger rental yield and which has considerably greater capital growth potential.

The shortage of smaller, less expensive properties has been a major issue in the overall lack of supply in recent months, holding back first time buyers and blocking movement further up the ladder. An increase in second home sales is helping to satisfy this high level of housing demand at the lower end of the spectrum, below the £1 million mark, which is boosting Central London’s first time buyer market.

James Hyman, partner for residential sales at Cluttons, said:

“There are a number of factors driving an increase in supply at the lower end of the market, which will help unlock stagnation further up the ladder. The exceptional demand for smaller, more affordable properties in recent months, as buyers are increasingly priced out of the market for larger homes, has resulted in remarkable price growth. This is tempting owners to raid their piggy bank homes and monetise their assets, using the cash to secure their personal finances, help upgrade their main residence or reinvest in a higher yielding buy to let property.”