Yolande Barnes, head of Savills residential research, says:
“Some of the heat has come out of the market and values continue to be sustained largely by still relatively low stock levels. We’ve also yet to see any significant influx of bonus money though, which suggests buyers are still keeping their options open.
“Soundings from the market suggest that we are at or approaching a tipping point where buyers will resist pricing over the current level. The spectre of further caps on bonuses, higher taxes and a looming election, all against a gloomy economic backdrop, may be expected to stall the market and combine to make further significant rises unlikely.”
Barnes believes that the surprise announcement of a higher stamp duty band may prevent big falls as it is expected to bring sales forward into the 2010/11 tax year. The consequently higher levels of transactions this year will help mitigate against falls in value.
Savills research department believes that the longer-term prospects for London property are much more positive and significantly better than other UK regions, provided London maintains its status as a major world city and financial centre.
International buyers become more important:
International buyers now account for 60 per cent of the prime central London market, up from the normal 50 per cent. This, combined with the weakness of sterling, has drawn out increased investment demand which is supporting some of the lower tiers of prime, as well as investment markets such as east of City locations, Canary Wharf and Docklands.
Ultra prime transaction levels have generally been slower to recover than other parts of the prime markets, with values just 6.8 per cent up on this time last year, we believe this can be attributed to the fact that this sector of the market was far more resilient in the downturn, growing throughout most of 2008 but will also remain relatively subdued for a while.
Like the rest of prime central London, the prospects for longer term demand in this sector are extremely healthy but entirely dependent on London's pre-eminence as a world city.
Barnes says:
“The modest growth in ultra prime values - particularly relative to rebuilding of wealth that has happened over the past year, combined with a favourable exchange rate - presents a buying opportunity for ultra high net worth global buyers.
“There are reports of Far Eastern and Russian investment cash looking for a home in real estate. Higher yields and long term rental and capital growth prospects should attract more investors, perhaps from the Americas and the South East-Asia, particularly if the dollar/sterling exchange rate remains low.”
Ed Lewis, head of Savills residential development confirms this:
“Meetings with international clients, particularly in the Far East and Russia, suggest that there is a very strong unsatisfied demand amongst the global super rich. They are now ready to invest in the right prime London property when and if it becomes available.”
Beyond the centre - some areas play catch up while others slow:
Outside of the central areas, some locations that were slow to pick up value last year have shown strong growth in the first quarter of this year. Higher value houses in Putney and Richmond, for example, saw exceptional growth of over 9% in the quarter after a lacklustre performance in previous quarters compared with Fulham and Wandsworth.
The South-West London locations of Fulham, Wandsworth and Barnes, which led the upturn last year, appear to be slowing in line with prime central London. Prices were up 3.2% in the first quarter of this year, following 4.9% growth in the last three months of 2009.
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