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Surprise Leaders in the Prime London Property Race

Fri 26 Apr 2013

Our latest quarterly London Property Monitor has just hit the streets and it showed some particularly interesting trends in the market. Firstly, Ill bet most people still think that Prime Central London (PCL) is outpacing all other parts of the market? Well, youd be wrong. Our data shows that for the past year, outer prime or 'Non-Central Prime London' as we call it, has been appreciating at a faster pace than PCL and that continued into the first quarter of 2013.* I think there are a few reasons for this; buyers looking for better value, the relative absence of sales over 2million due to the bedding in of the new 7% stamp duty, investors looking for a better rental return and good capital appreciation, and possibly, the still chronic shortage of properties to sell in all parts of London. In my view, as central London has taken a comparative breather for the past year or so, there is a strong argument that it has got a bit of catching up to do as the differentials come closer together - and we may see PCL surge ahead again later in the year.

The first quarter has still seen plenty of foreign nationals buying, however interestingly, certainly in the first quarter, they appear to be ones that are already living here and have now decided to buy. Weve seen many LESS cash buyers. Last year, around 60% of our sales in PCL were to 100% cash buyers. This year, that has dropped substantially. In my view, that has much to do with the extremely low borrowing rates, brought about by the Funding for Lending scheme. It now seems stupid to use all your cash when you can borrow at such rates. This may enable some to gear their purchases more and to spend their cash on other properties (or other goods) or simply just keep it for a rainy day.

The lettings market has had an up and down quarter with an oversupply of properties in PCL and a dearth of supply in Non-Central Prime London. This means that prices have once again performed better in the outer prime areas. There was generally an oversupply of two-bedroom flats (traditionally the buy-to-let landlords preferred purchase) and an appetite amongst a good number of tenants to choose to live by themselves. They are deciding to pay more for a really good one-bedroom flat, rather than a poky two-bedroom, and as a result we had the interesting scenario of one- and two-bedroom flats in many cases being extremely close in price. As the spring market progresses we expect to see this anomaly iron itself out as more sharers enter the market.

Overall, the market has behaved as expected in the first quarter of the year, with a continued lack of property and a real appetite from a variety of buyers, both domestic and international, looking to invest in bricks and mortar. This is unlikely to diminish in my view - with property prices having risen between 1% and 6% in the first 3 months! How this pans out for the remainder of the year is difficult to determine, however I see pockets of London as undoubtedly enjoying double digit growth during 2013.

 

*'Prime Central London' comprises representative baskets of properties covering Chelsea, Kensington, Notting Hill, Holland Park and Pimlico. Non-Central Prime London comprises outer areas such as Clapham, Balham, Battersea, Barnes, Pimlico, Little Venice, Fulham and Brook Green. Prime London is used to describe all these areas combined including Prime Central London and Non-Central Prime London.

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