Press Release: Importance of Londons Domestic Home Buyers Grows As They Recycle Wealth
Thu 31 Jan 2013
- Proportion of London buyers upsizing rises to 19%, the highest level in two years
- Domestic buyers grow in prominence as more recycle property wealth
- Prime property price growth slowed to 1.3% in Q4 2012
A rising proportion of homeowners in the prime areas of London are cashing in on capital gains to trade up or down, according to estate agent Marsh & Parsons latest London Prime Market Monitor.
Home buyers upsizing in the prime areas of London accounted for nearly one-fifth (19.3%) of all moves in Q4 2012. This is its highest level since Q1 2011, and represents a rise from 14.5% in the previous quarter, and 17% a year ago. Those trading up are able to take advantage of capital gains 11.2% in the last year alone and a favourable mortgage market for those with equity.
Likewise downsizers, cashing in after strong capital appreciation, make up 6.6% of the sales market, compared to 4.9% a year ago, and 3.6% in Q4 2010.
By stark contrast, the first-time buyer market is still suffering as a result of tight borrowing criteria and high deposit requirements, with the proportion of purchases in the prime areas of London that are made by first-time buyers dropping by 3 percentage points between Q4 2011 and Q4 2012.
Domestic buyers come to the fore
International buyers remain in strong numbers in the more traditional areas of prime central London. In the last year, 52% of purchases in Chelsea were made by international buyers, followed by 47% in Kensington and 46% in Notting Hill.
However with the increasing number of homeowners recycling wealth within the capital, domestic buyers are rapidly growing in prominence. In the fourth quarter of 2012, 73% of purchases in prime London were made by domestic buyers, driven by the activity of UK nationals outside Kensington and Chelsea. This compares with 71% of purchases in the previous quarter and 67% at the start of the year.
Domestic buyers were in stronger concentrations outside the most expensive and traditionally prestigious central areas. In 2012, Balham proved most popular for domestic buyers, with 89% of all buyers in the area being UK nationals while Clapham saw 86%.
Peter Rollings, CEO of Marsh & Parsons, comments: International buyers are a crucial part of the patchwork of Londons prime property market, especially within central areas. But the importance of domestic buyers is often overlooked and it grew as 2012 progressed as they recycled wealth within London. Longer term homeowners have seen their equity soar on the back of substantial price growth in the last few years, and many are taking the opportunity to unlock equity by downsizing, or use their increased financial clout to secure the finance they need to upsize.
The Funding for Lending Scheme is knocking down rates, and, unsurprisingly, banks are still favouring those with substantial deposits with the best deals. This is playing into the hands of London homeowners who have seen their equity grow and are looking to move.
Price growth slows as supply widens
The growth in property values in the prime areas of London slowed to 1.3% in Q4 2012, compared to 3.5% in the previous quarter as the supply of property on the market increased by 3.6%. However, despite the quarterly slow down, annual growth was 11.2% on the back of more rapid growth earlier in the year.
Prime London Property Price Movements
Average value Quarterly Change Annual Change
Prime London 1,310,236 1.3% 11.2%
Prime Central London 1,901,265 0.8% 9.8%
Despite the slower capital growth in the last quarter, 43.5% of properties across the prime areas of London were worth 1m or more in December, a figure that has risen from 43% in September, and 37.5% in December 2012.
Peter Rollings continues: Supply increased for a second successive quarter, and this has helped rein in the level of price growth seen earlier in 2012. Without further interventionist government property tax policy, we anticipate the market to gradually move on from the additional tax burdens placed on many prime buyers last year, and a strong spring will help drive steady growth for the remainder of the year.
For further detailed analysis of Londons prime market, please see Marsh & Parsons accompanying London Prime Market Monitor.
The Prime Market Monitor uses a repeat valuation methodology that tracks values in a robust and representative mix-adjusted basket of properties across prime London in the areas in which Marsh & Parsons operates. Prime central London comprises representative baskets of properties covering Chelsea, Kensington, Notting Hill, Holland Park and Pimlico. Prime London comprises all areas in prime central London, and includes areas such as Clapham, Balham, Battersea, Barnes, Little Venice and Brook Green.
Supply and demand statistics are based on an audit of Marsh & Parsons registrations and instructions during the quarter. Buyer profile information taken from Marsh & Parsons quarterly MI data.
For further information please contact:
The Wriglesworth Consultancy
Dan Pike / Neil Mackwood
0207 427 1430 / 0207 427 1400
Marsh & Parsons
Marsh & Parsons, a multi-award winning estate agent, has been part of the London property scene since 1856. With 17 offices situated in prime positions across central, west and south west London, they have an intimate and extensive knowledge of the area. Marsh & Parsons services include residential sales and lettings, property management, new homes, developments & investments, professional surveying and corporate & relocation services.
Marsh & Parsons was acquired by LSL Property Services plc in November 2011, but continues to operate as a separate business, retaining its current management team.
A business that is built on energy, agility, professionalism and knowledge, Marsh & Parsons business aim is to be the agent who not only understands the local area around their offices better than any other agent, but is also at the heart of the community. They believe that Local know-how will achieve better results and make the difference for their clients.