• Prices in prime central London rose 0.8% in October
• Annual growth is now 10.1%
• Prices are now 52% higher than in March 2009
• Price growth in the year to October was stronger for apartments (11.1%) than for houses (8.4%)Price growth in the prime central London market continued through October with the Knight Frank Prime Central London Sales Index confirming a further 0.8% rise.
Prices have been climbing now on a monthly basis since November 2010 and stand 52% above the post-financial crisis low of March 2009.
The eurozone crisis has continued to boost demand for prime central London property among international buyers, many of whom are driven by the search for a ‘safe haven’ for their assets. As we noted in last month’s results, this growth has taken place despite the impact of the March budget’s 40% rise in stamp duty for £2m+ homes and the prospect of new rules for an annual charge on £2m+ properties held in certain ownership structures. We expect a number of prospective buyers to hold off on making decisions until further clarity regarding the rules is provided. This is expected to come in the Autumn Statement on 5 December.
Despite the Chancellor dismissing the idea of introducing a ‘mansion tax’ during the Conservative Party conference, the talk of such a levy on £2m+ homes has created further uncertainty.
Among the areas performing particularly well in terms of price appreciation is Marylebone, which has seen growth over the past year of 14.5% – the highest annual rise of all areas covered by the index. Other significant increases over the past three months were seen in the City (3.5%), Islington (3.4%) and Belgravia (3.2%). This has been supported by continued demand from buyers for the very best stock.
Our analysis of market activity confirms that average prices have climbed 10.1% over the past year, with flats (11.1%) outperforming houses (8.4%) in terms of growth. Perhaps unsurprisingly, given the increase in stamp duty, homes in the sub-£2.5m price band have seen the strongest price growth both on a yearly and monthly basis. Our forecast for 5% growth at the start of the year in prime central London prices in 2012, is likely to be exceeded – with prices likely to end the year higher by around 8%.
