With average prime central London house prices hitting £3,968,300 in September, annual price growth of 11.4% has translated into daily price rises of £1,117 over the past 12 months.
Liam Bailey, Head of Residential Research, Knight Frank, explains why the eurozone crisis has boosted London’s luxury market:
Price growth in the prime central London market continued through September with a further 0.6% rise.
Prices have been rising strongly since April 2009, and are now nearly 5% higher than their previous peak in March 2008.
If there has been an impact from European and global financial and economic market turmoil over the past few months, it seems only to have pushed more buyers into the central London market.
Our analysis of market activity in the three-month period to September, compared to the same period in 2011, confirms a sector in good health.
On the demand side the number of new buyers is up by 7% over this period, viewings are up by 25%, and the number of offers being made on properties is higher by 24%.
While the number of properties has risen by 13%, the rate of sales is keeping pace, with the number of exchanges rising by 38% year-on-year and the number of properties going under offer rising by 57% over the same period.
Sharp price rises over the past two years have not discouraged buyers from entering the market. Growth in demand is easily absorbing stock volume increases without downward pressure being placed on prices.
Last month I pointed to low interest rates and the weak pound as the key issues driving price and demand growth at the current time – with some buyers from Asia-Pacific for example still able to benefit from an effective 25% discount on 2008 prices.
In addition it is increasingly clear that the ongoing crisis in the eurozone, as well as wider global market uncertainty, is helping to support the market.
The role of central London property acting as a safe haven investment in periods of economic turbulence has been confirmed by the fact that the recent growth in purchases has been overwhelmingly driven by international buyers, with domestic buyers now accounting for only 45% of the central London market, compared to 51% 12 months ago.
As the market has moved into new peak pricing territory, we have been watching very closely to see whether there is evidence of purchaser resistance to these new levels.
It appears that buyer concerns over alternative investment opportunities and the potential impact of European and global economic turmoil is trumping any concerns over the sustainability of property prices in London at the current time.
Noel Flint, Head of London Residential, Knight Frank, said:
“These figures portray the current state of the market. Prime Central London is again the focus of the international market.
"The disruption and upset caused by the London riots has not resulted in any long lasting stain and the capital's reputation remains as one of the best places in the world in which to live and work.
“With London prices rising gradually even domestic buyers, who represent 45% of the Central London market, are mindful that if they can afford to move they should not miss an opportunity.
"The selection of good properties is still frustratingly small and in a market where buyers are cautious and wanting to buy best in class, good properties will go quickly and usually attract competitive bidding.
“With low interest rates likely to be a feature of the market for the next 6-12 months I anticipate demand continuing at current levels and a supply of new properties still being lower than where we would like them to be.”
