Marsh & Parsons:

Record January for the Prime London Property Market

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  • Almost half (48%) of Prime London property sold for, or in excess of, the asking price
  • Over a third (34%) of property in January sold within two weeks of being put on the market
  • Ratio of supply and demand rose to a four-year high with 23 registered buyers for each available property
  • Strong demand is pushing prices higher, with the average price of two-bedroom properties in Outer Prime London increasing by 17% in 2013, an increase of almost £100,000

 

The Prime London market experienced a bumper January in 2014, with properties selling in record time and for closer to the asking price than ever before, according to new data from estate agent Marsh & Parsons.

 

Over a third (34%) of property in January was sold within two weeks of being put on the market – twice as many properties in this timeframe compared to January 2013.

 

In addition, almost half (48%) of all property in January sold for, or in excess of, the asking price. This meant that, on average across all property sold, 99% of the asking price is currently being achieved – an increase from 98% during the past two years.

 

Peter Rollings, CEO at Marsh & Parsons, commented: “Now is the time to get a jackpot price on property thanks to a surge of potential buyers entering the market in the New Year. These extraordinary conditions have created a strong seller’s market and one of the best opportunities to sell property in recent years.

 

“But conditions like this won’t last. Many people believe that the best time to market property is during the busier months of the spring. But these sellers could be missing a trick – the increasing levels of property supply at that time of year will dissipate current levels of demand, and bring about a return to more normal market conditions in the spring.”

 

Supply and Demand

 

In January, there were 23 registered buyers competing for each available property on Marsh & Parsons’ books. This was the highest level since 2010, and represents a dramatic increase from the ratio of 14 registered buyers per property in January 2013.  Compared to the same point last year, 19% more buyers entered the market in competition for 28% fewer properties – making this a strong seller’s market.

 

But for the last four years, an average of 10% more property has become available between the months of January and April.  This percentage jumped considerably between 2012 and 2013 as the property market recovered, and if this trend continues, 18% more property could hit the market by spring 2014.

 

Peter Rollings continued: “London’s rising population, together with a perfect combination of low interest rates and competitive mortgage finance has created a surge of potential buyers. But the supply of housing stock has remained more subdued. Our more astute sellers are putting their properties on the market now because they know that the imbalance of supply and demand will help them to get a great price.

 

“In a seller’s market, property regularly goes for over the asking price, so buyers need to be realistic when viewing property and placing bids. When they find their chosen property, they must not delay. Being decisive is key to successful negotiations.”

 

Impact on Prices

 

The average value of two-bedroom properties in Outer Prime London increased by nearly £100,000 during 2013 following a 17% annual growth, according to Marsh & Parsons’ latest London Property Monitor.

The average value of two-bedroom properties in Outer Prime London increased by nearly £100,000 during 2013 following a 17% annual growth, according to Marsh & Parsons’ latest London Property Monitor.

 

The average price of a two-bedroom property in Outer Prime London – comprising non-central areas such as Brook Green, Fulham and Barnes – now stands at £673,812. This is an increase of £98,214 since Q4 2012, when the average price of a two-bed in these areas was £575,597.

 

The average price of a two-bedroom property in Outer Prime London – comprising non-central areas such as Brook Green, Fulham and Barnes – now stands at £673,812. This is an increase of £98,214 since Q4 2012, when the average price of a two-bed in these areas was £575,597.

 

Property Type Breakdown

   

All Prime London

Prime Central London

Outer Prime London

1 Bed

 £     520,076

 £        599,131

 £        470,668

2 Bed

 £     939,839

 £     1,365,482

 £        673,812

3 Bed

 £  1,577,109

 £     2,362,956

 £     1,004,493

4 Bed

 £  2,024,000

 £     2,979,556

 £     1,426,778

 

 

Looking at average values across all property types, growth in Outer Prime London outpaced Prime Central London by 50% during 2013, with annual growth of 15%, compared to annual growth of 10% in the Prime Central areas of Chelsea, Kensington, Notting Hill, Holland Park and Pimlico.

 

The top five Outer Prime ‘hotspots’, where the highest levels of growth were recorded during 2013 were: Barnes (average annual price growth of 19%), Balham, Clapham, Fulham (all 18% annual growth), and Battersea (15% annual growth). 

 

Peter Rollings continued: “Last year the biggest price increases were to be found in the Outer Prime London ‘villages’. These areas are all popular with UK buyers and are favoured for their community feel and local atmospheres. Slightly lower property prices in these areas also attract those who may have been priced out of more central areas.

 

“But early indications in January point to a turnaround. While parts of Outer Prime London sped ahead in 2013, our data suggests that Prime Central areas are due for a growth spurt in 2014. This was beginning to happen in the third quarter of last year and looks set to surge forward later this year.”

 

Prime London Property Price Movements

 

Average value

Quarterly Change

Annual Change

Prime London

£ 1,477,699

3.0%

12.3%

Prime Central London

£ 2,108,717

2.3%

10.0%

Outer Prime London

£ 1,083,313

4.0%

15.1%

 

 

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Value of one-bedroom properties in Prime London rises by over £60,000 in a year

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  • One-bedroom properties in Prime London have appreciated by 6% in the last quarter, and by 14% in the last year
  • One-bedroom properties are very popular with first-time buyers and buy-to-let investors, spurred on by low interest rates and Help to Buy
  • Prime London property overall has risen by 1.6% in the past quarter, 10.3% in the past year

 The average value of one-bedroom properties in Prime London has risen by over £60,000 in the past year, following a 14% annual growth, according to estate agent Marsh & Parsons’ latest London Property Monitor.

The bulk of this increase was gained in the last three months, after a strong 6% quarterly rise increased the average value of one-bedroom properties by an extra £29,140. This follows three strong quarters of growth in the past year, contributing to a 14% annual growth – equivalent to £62,063 in a year.

The average price of a one-bedroom property in Prime London now stands at £502,139. In Prime Central London, covering the most expensive areas of Chelsea, Kensington, Notting Hill, Holland Park and Pimlico, the average value of a one-bedroom property has risen to £583,036 – a 9% increase in the last year, equivalent to £48,703 in a year.

Peter Rollings, CEO of Marsh & Parsons, comments: “With returns like these, it’s no surprise that people are queuing up to buy Prime London property. Competition for one-bedroom properties in particular is fierce. Spurred on by the rapidly improved availability of mortgages and low interest rates, first-time buyers are flooding the market in competition for the best properties in this price bracket.

“In addition, one-bedroom properties generate the best rental yields, making them a popular purchase for buy-to-let investors. We have noticed many young, would-be buyers adopting more European attitudes to renting, with many choosing to become long-term renters, rather than saving up for a deposit. As a result, the value of one-bedroom properties in Prime London is shooting up the scale.”

One-bedroom properties have risen in value at a faster rate than properties of other sizes in Prime London. The overall rate of growth in Prime London, reflecting all sizes of property combined, was 1.6% in the past quarter and 10.3% in the past year.

By comparison, two-bedroom properties have appreciated by 10% in the last year in Prime London, and by 7% in Prime Central London. Three-bedroom properties have appreciated by 12% in the last year on average across both Prime and Prime Central London.

Property Type Breakdown

   

Prime Central London

Non-Central Prime London

All Prime London

1 Bed

 £     583,036

 £        429,756

 £        502,139

2 Bed

 £  1,302,125

 £        615,495

 £        895,770

3 Bed

 £  2,298,161

 £        923,559

 £     1,523,116

4 Bed

 £  2,925,556

 £     1,364,599

 £     1,976,985

Strong price growth continues

In Prime London as a whole, property values have continued to rise, with prices climbing by 10.3% in the past year and by 1.6% in the last quarter.

However, for the first time in five quarters, the more expensive areas of Prime Central London have outpaced Prime London as a whole by experiencing a higher quarterly rate of growth. The rate of growth in Prime London was 1.6% in Q3, while in Prime Central London this figure was 1.7%.

Prime London Property Price Movements

 

Average value

Quarterly Change

Annual Change

Prime London

£ 1,426,243

1.6%

10.3%

Prime Central London

£ 2,040,387

1.7%

8.2%

Supply and Demand

The number of registered buyers has increased by 6% in the last quarter, but for the first time this year, there has also been an increase in the supply of property to the market. While the volume of supply remains at a historic low – there are still 17% fewer properties on the market than at the same time last year – the ratio of supply to demand is beginning to stabilise.

Peter Rollings continued:The ratio of supply and demand is the key factor which determines prices on the London property market. While interest rates remain low, Prime London property will continue to be seen as an attractive investment opportunity for both UK and overseas buyers, and prices will remain high.

“However, rather than create a bubble, we may find that Help to Buy actually stabilises prices by encouraging first-time sellers to put their properties on the market and take their next step up the property ladder. For the past three quarters, a lack of available property has created a high premium for those on the market, but the gradual increase in supply, which we are beginning to see now, combined with the wide volume of property development taking place, may start to initiate more ‘normal’ market conditions.”

Daily Paper Summary: Wednesday 6th November

Business/Economic News

Business spending fuels boom in services: Britain’s services-led boom could owe more to business spending than thought, according to an influential poll (Purchasing Managers’ Index) that may alleviate concerns that the economic recovery is being fuelled by debt-laden households. The October data showed that new orders were at their highest level since the series began in July 1996. FT p2 (Claire Jones, Economics Reporter), CityAM p1 (Michael Bird), Daily Telegraph B1; Britain moves into top gear as 1000 jobs made each day by private sector businesses, Times p45 (Patrick Hosking)

Ed Milliband’s popularity has been boosted significantly since Labour Conference, particularly his fuel bills pledge. FT p2 (George Parker, Jim Pickard)

Personal Finance:

Wonga under siege as it faced criticism from MPs and upheaval in its boardroom, less than 24 hours after launching a PR drive to revive its reputation (including film of 12 borrowers). Wonga and other payday lenders are attacked for ‘grooming’ young people to take out loans, including advertising in childrens’ tv. FT p1/2 (Elaine Moore, Elizabeth Rigby), The OFT is continuing its review of payday lenders and is reported to continue to have concerns about practices such as failing to conduct affordability checks. City AM p9, The Times p49, Independent p1/10-11

Middle class pensioners in care homes are routinely forced to pay up to £150 a week on top of their bills to subsidise council funded residents, report by Independent Age warns. Daily Telegraph p2

Property:
The average price of a one bed flat in the most desirable parts of London outside ‘Prime Central’ areas has leapt to half a million pounds for the first time. (Marsh & Parsons), Daily Tel p8

House prices to soar in commuter areas over next 5 years (Savills) – foreign buyers targeting prime properties in central London will force more families into homes on fringes of London. Daily Telegraph B5

But CGT plan to tax foreign owners of British property could drive them out says PWC – it is thought George Osbourne could introduce this in Autumn Statement next month. Daily Telegraph B5

Recruitment/HR:
Women around the world work longer hours than men but do not get paid for much of it, when domestic and caring duties are factored in, research by Organisation for Economic Co-operation and Development shows. Across the world’s leading economies in a trend led by Italy, women put in an average of 24.5 hours of paid work per week but another 31.5 hours of unpaid work. Men on average do 33.7 paid hours per week, 30% more than women, but half as much unpaid work as women. Daily Telegraph, p8 (John Bingham)

‘Working Britain needs a payrise’ says Ed Miliband – urges supermarkets and call centres to give their staff a pay rise to help them deal with the rising cost of living, saying Labour would give tax breaks to firms that pay staff a living wage. Daily Telegraph p14 (Christopher Hope)

MARSH & PARSONS:

Average Price of Two Bedroom Property in Prime London could reach £1 million by early 2014

  • Two-bedroom properties in Prime London grew in value by 14% over the last year
  • There is currently an average of 18 buyers per property across Prime London as a whole
  • Two-bedroom properties are highly desirable for both young professionals and investors alike

The average price of a two-bedroom property in Prime London could reach £1 million by March 2014 if prices continue to increase at the current rate, according to research from estate agent Marsh & Parsons.

Two-bedroom properties in Prime London appreciated by 14% during the last year, to reach a current average value of £909,203, according to Marsh & Parsons’ latest research.

If this rate of growth continues for the next three quarters, the average price of a two-bedroom property in Prime London will be £975,843 by the end of 2013 and £1,010,974 by the end of the first quarter of 2014.

Two-bedroom properties experienced a much faster rate of growth than other types of properties in the three months to June 2013, with a 6% increase from the previous quarter.  The slowest quarterly growth was among four-bedroom properties, the average price of which appreciated by a relatively modest 3% during the last quarter.

Peter Rollings, CEO of Marsh & Parsons comments:Compared to the rest of the country, Prime London property prices may seem high, but the figures don’t tell the whole story. There is of course a huge variation between different areas in Prime London. Very high value and high demand areas such as Kensington & Chelsea lift up the overall average figures, but there are still many areas of Prime London which represent better value for money. As a result, we’re seeing many young couples and first-time buyers heading to parts of South and South West London in search of more space for their money.

“In addition, the dramatic price increases we’ve seen in the last year bear witness to the rapidly improved availability of mortgages and wider signs of economic recovery which have helped to clear the bottleneck of those who were waiting for the right time to purchase property. But over the coming year, we expect the rate of growth to stabilise in most areas as the Prime London property market returns to normal.”

Marsh & Parsons calculated the average price using the mean average value of all the two-bedroom properties in a mix-adjusted, representative basket of properties across the areas of Chelsea, Kensington, Notting Hill, Holland Park, Pimlico, Clapham, Balham, Battersea, Barnes, Pimlico, Little Venice and Brook Green.

In Prime Central London – including just the areas of Chelsea, Kensington, Notting Hill, Holland Park and Pimlico – the average price of property has already passed the £2 million mark.

An imbalance of supply and demand is contributing to higher prices. During the last quarter, 11% more buyers entered the market in competition for 14% fewer properties. A total of 18 buyers per property were recorded.

The shortage of housing stock on the market has also resulted in demand for property rippling out from the centre. As a result, property prices in less central areas such as Clapham, Balham and Battersea are also increasing rapidly. In Q4 2012, an average two-bedroom property in Prime Central London cost 48% more than the average two-bedroom property in Prime London as a whole. In Q1 2013 this discrepancy narrowed to 45% and in the last quarter the gap closed to just 40%.

 

Average Prime Central London property now worth over £2 million

  •  Prime London property grew in value by 3.6% in the last quarter – and by 3.4% in Prime Central areas
  • Imbalance of supply and demand helping to inflate prices and pushing buyers further afield
  • Q2 2013 was a bumper period for transactions in Prime London as a whole, with 40% more properties changing hands than in the previous quarter

 The average property in Prime Central London is now worth more than £2 million, according to estate agent Marsh & Parsons’ latest London Prime Market Monitor.

The value of property in central hotspots including areas such as Chelsea and Kensington has risen by 9.3% in the past year and by 3.4% in the last quarter.

Increased demand at a time of an acute shortage of stock is pushing prices higher. During the last quarter, 11% more buyers entered the market in competition for 14% fewer properties.

While transactions across Prime London as a whole increased by 40% during the last quarter, the volume of transactions in central areas reduced by 38%.

Peter Rollings, CEO of Marsh & Parsons, comments: “It’s true that the imbalance of supply and demand is pushing property prices higher in Prime London areas. But it’s also creating an excellent time to sell property.  Helped by the rapidly improving availability of mortgages, buyers are queuing up for the chance to buy a Prime London home. Property is changing hands in record time and for close to the asking price, with 98% of the asking price for Prime London property regularly being achieved.”

What £2m will buy…

Five-bedroom house in Balham (£1.99m)                

Three-bedroom flat in Kensington (£1.95m)

Despite the introduction of the 7% stamp duty tax, the number of properties worth £2m or more has continued to increase. Over a third (38%) of Prime Central London properties are now worth £2m – and in Prime London as a whole, almost a quarter (24.6%) of homes fall into this category.

The price increases are particularly pronounced in properties which were worth more than £3m in January 2010. At the beginning of 2010, the average price of a property in this category was £4,509,739. The average current price for properties in this category is now £5,481,884 – an increase of 20% in just 3.5 years.

Strong price growth continues

In Prime London as a whole, property values have continued their upward momentum, with prices climbing by 12.7% in the past year and by 3.6% in the last quarter.

For the past five quarters running, growth in Prime London as a whole has outpaced Prime Central areas; experiencing consistently higher quarterly growth than its most central parts alone.  But the gap is closing, with Prime Central London growth just 0.2% slower than that of Prime London overall in the last quarter, compared to a 1.6% difference in Q1 2013.

Prime London Property Price Movements

 

Average value

Quarterly Change

Annual Change

Prime London

£ 1,406,889

3.6%

12.7%

PCL

£ 2,006,102

3.4%

9.3%

Two-bedroom properties in Prime London

In terms of property types, the property group which experienced the largest growth spurt last quarter were two-bedroom properties in Prime London – with a 6% value increase compared to the previous three months. The slowest movers were one-bedroom properties in Prime Central London, which increased in value by a relatively modest 1% in the three months to June.

Peter Rollings continued:Two-bedroom properties in Prime London offer substantially better value for money than smaller properties in the most central areas. Many first-time buyers flock to the village atmospheres of South and South West London in search of a place to lay down roots. 

“During the current economic climate, many buyers are looking for longer-term investments, so larger properties in less central areas are becoming an increasingly attractive prospect.”

 

Marsh & Parsons: Substantial Growth Across London as Non-Central Areas Surge Ahead

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  • Prime London property prices rose by 12.8% from the previous year
  • Proportion of London buyers upsizing in central areas rises by 25% from the previous quarter

Property values in prime areas of London have increased by a substantial 12.8% in the past year, following a rise of 3.6% during the first quarter of 2013, according to estate agent Marsh & Parsons’ latest London Property Monitor.

But it is actually the areas of Non-Central Prime London that have experienced the most dramatic growth, as a relative lack of supply pushes buyers and investors further afield.

The average premium being paid for properties in Prime Central London now stands at just 43% more than the price being paid for the equivalent Prime London property – a 4% drop from the previous year.

But given the increasingly favourable mortgage rates available to those with higher loan-to-value ratios, growth in Prime Central areas is expected to catch up with that of its outer neighbours before long.

Prime London has now been outpacing Prime Central London for the past three quarters, by experiencing consistently higher quarterly growth than its most central parts alone.

There has also been a shift outwards for investors who are looking to profit from purchases in the rising areas of Non-Central Prime London, including Battersea – where rents have increased by an average of 6% in the past quarter.

The proportion of purchases by investors in Prime London has increased from 17% to 25% in the last quarter, while those purchasing in Prime Central areas has decreased steadily for the last three quarters to just 7% in Q1 2013.

Peter Rollings, CEO of Marsh & Parsons, comments:Homeowners have seen their equity soar as a result of such significant price growth in the past few years. We are now seeing many of those seizing the opportunity to sell at prices that have recovered and in many cases exceeded the highs of 2007, and then re-invest in the same market, taking advantage of the historically low mortgage rates available due to the funding for lending scheme.

“The relatively low increase in the value of Prime Central London property – compared to its Non-Central neighbours – means that there’s never been a better time to buy in Prime Central London. The enduring appeal of a classic home in a central location will never go out of fashion.”

Prime London Property Price Movements

Average value Quarterly Change Annual Change
Prime London £1,357,837

3.6%

12.8%

PCL £1,939,534

2.0%

9.3%

As a result of property price growth, the number of properties in the capital now worth £1m or more has increased dramatically. In March 2013, almost half (46%) of properties in Prime London were million-pound homes – a figure that has risen from 43% in December 2012, and 37% in March 2012.

Many homeowners in Prime Central London are now rushing to take advantage of these substantial value increases and cash in their capital gains to trade up into bigger properties. Home buyers upsizing in Prime Central London accounted for over a third (36%) of all moves in this area in Q1 2013 – a 25% increase from the previous year.

By comparison, the proportion of first-time buyers has not changed significantly in the past year. In Prime Central London the percentage has decreased by 4% in the past year, while in Prime London overall the proportion has grown by 4%.

The stark contrast with these figures against the proportion of those trading up suggests that many lenders are still channelling increased rates from the Funding for Lending schemes towards less risky borrowers with higher loan-to-value ratios.

Peter Rollings continues:While some argue that increased stamp duty on higher-value homes is affecting the value of properties over £2 million, it’s reassuring to see the number of million pound homes in the capital continue to flourish. We are continuing to see record levels of properties at this value and there is no sign of it stopping.”

London homeowners sit tight as overseas investors eye up Prime London

  •  Prime Central London market to benefit from modest 2-3% growth in 2012
  • Greater London to take slower path to recovery, with annualised average growth of 2% over the next 5 years
  • Price falls of almost 3% in wider UK, followed by further fall of 1% in 2013
  • Overseas investors now make up 20% of all buyers in Prime London
  • Readjustment of Prime Central London rental market continues

The Prime Central London market is seeing persistent demand in the current global economic and financial instability, while supply levels are close to an historic low as homeowners and investors sit on prime assets, reports Cluttons in its Residential Property Forecasts Q2 2012, published today.

These same factors are stimulating demand from investors, particularly from overseas based buyers seeking to secure funds in the prime London residential market.  Buyers from Greece,Spain and Italy have a growing presence in the market, with 20% of all buyers in central London currently from abroad. This figure rises to between 35 – 40% for properties valued over £5 million. However, the vast majority of these buyers have a connection with the UK and are making purchases from an informed position.

The pace of growth in the London market has slipped over recent months, with activity in the housing market taking a backseat to the Jubilee and the approaching Olympics. The current low volume of homes for sale is likely to persist over the summer which, combined with ongoing uncertainty, means house prices are set to grow by 2 – 3% in 2012. While subdued in historical terms, this is a positive outcome for the market in the current climate. Cluttons anticipates UK house prices will fall by close to 3% this year, followed by a marginal further fall of up to 1% in 2013.

Sue Foxley, Head of Research at Cluttons, said:

“The central London market remains buoyant, but even London activity is slowing relative to its performance in 2011. The outcome of the current Eurozone crisis is not yet known, which is denting confidence and encouraging Londonproperty owners to retainCentral London residential assets in the face of instability in the residential markets. At the same time, strong demand from international buyers seeking a safe haven is creating even more competition for homes and sustaining prices. Whatever the outcome of the Eurozone crisis, buyers and investors are demonstrating faith that London is well positioned to see a faster return to growth than most of its European counterparts.”

The Central London rental market continues to slow following the unsustainably high growth witnessed last year, but despite the current readjustment Cluttons remains positive about the medium term prospects for the sector. Demand is strong and the ongoing difficulties faced by prospective first time buyers in saving for a deposit and securing a mortgage, will support rental values. Cluttons expects rental growth in the prime market will increase by an annualised average of 3% over the next five years to 2016.

For a complete copy of Cluttons’ Residential Property Forecasts Q2 2012 please visit http://www.cluttons.com/en-GB/research/market-reports.aspx