Values in prime central London rose by 1.9 per cent in the three months to the end of September, according to the Savills prime central London index. This takes annual growth to a relatively modest 5.6 per cent, but continues a record-breaking period of steady, single digit annual price growth.
There are now clear signs of outer prime London playing catch-up, with average prices across the wider markets of prime London rising 3.3 per cent in the quarter and 9.2 per cent year on year.
The standout performer is prime southwest London – a largely domestic market that stretches from Fulham to Wimbledon – where prices rose 4.0 per cent in the last quarter and 11.8 per cent year on year. These markets are now on average 28.1 per cent above their 2007 peak, just behind prime central London at 30.1 per cent.
Less accentuated but nonetheless robust price growth has also been seen in other locations that have historically lagged central London, such as Islington and Wapping.
Properties valued up to £1million have performed particularly strongly, while year on year growth in the £10million+ central London sub-market is just 1.8 per cent as prices appearing to have broadly plateaued at 38 per cent above their 2007 levels.
The strong price growth in London’s prime markets is often attributed to the influx of overseas money and while that has been the case previously, the strongest price growth in the capital is now being driven by equity rich buyers who are resident in London full time,” says Lucian Cook, director of Savills residential research.
Analysis by Savills research shows that £22 out of every £100 of equity spent in the UK housing market over the past year was spent in London. This means that of the total £146billion of equity applied to buying housing in the UK, £33billion was spent in London.
“The performance of this part of the market is a cash-driven phenomenon and completely unrelated to Help to Buy,” says Cook. “It provides no evidence of a credit fuelled boom in the wider housing market.
“It is a function of wealth being displaced out of central London, the recycling of significant housing wealth within parts of southwest and north London and more existing and newly created household wealth being allocated to housing in these areas.”
The Savills findings reflect the pattern of growth seen in the mainstream market . Land Registry data shows it is the boroughs of Lambeth, Camden, Wandsworth, Hackney and Hammersmith and Fulham that have shown the strongest annual price growth, indicating a deep stream of domestic equity driving values in these locations.
