London prime property reaching 'jackpot' prices
Thu 13 Feb 2014
London prime property reaching 'jackpot' prices
High demand for luxury central London property is creating extroadinary conditions for sellers, says agent, Marsh & Parsons, but the ratio of overseas buyers has fallen recently, according to Knight Frank.
Almost half of prime property in London, UK, is beating its listed price, with some reaching 'jackpot' values, according to data from agent, Marsh & Parsons.
But the ratio of overseas buyers of luxury central London property has fallen in the last two years, suggests a separate report from Knight Frank.
Nearly half of all luxury properties sold in January went for asking price or higher, according to figures from agent Marsh & Parsons.
More than one-third (34%) of properties sell within two weeks of going on the market and the ratio between supply and demand is at a four-year high, fuelling concerns over a property bubble in the capital.
Peter Rollings, chief executive officer at Marsh & Parsons, says sellers can now obtain a "jackpot price on property".
In January, there were 23 registered buyers competing for every home last month - nine more than a year ago.
London's property market is attracting investors from all over the world who consider residential property in the UK capital to be a 'safe haven' for their cash, says Sophie Dworetzsky, from international commercial law firm, Withers Worldwide. "If you invest in high-end London property you probably feel you have a degree of certainty - it's like a safe currency."
But the ratio of investors in London prime property has fallen, according to Knight Frank's Prime Central London Sales index.
The proportion of deals by UK-domiciled buyers rose from 68% in 2011 to 74% in 2013, while the ratio of European buyers fell from 16% to 11% last year and there were no Greek-domiciled buyers in 2013 for the first time in four years.
Over the last five years, there have been buyers from 64 different foreign nations. The biggest spenders have been the Russians at 13.3%, followed by United Arab Emirates at 12.8%, United States at 7.6%, Italy at 7% and India at 6.8%, according to data from Kinght Frank Residential Research.
Prime Central London property prices rose 7.8% in the year to January 2014 and values have risen for a record-breaking 39 months in a row, the report states.
However, the index's growth over the last decade to 135% shows that London has moved beyond a safe haven, says Tom Bill, Associate, Residential Reseach.
As the economy and investor sentiment continues to improve, more senior executives are searching for rented property, and prime central London rents rose 0.2% in January, the first rise for 21 months.
"The index has risen 135% since January 2004, when interest rates were 3.75% the third Lord of the Rings film topped the UK box office and 1 million bought you a two-bedroom flat on the upper floor of a converted busilding on a garden square in Knightsbridge.
"Today, 1 million would buy a basement-level studio flat on the same square. Such strong growth has been most recently linked to central London's reputation as a safe haven in the aftermath of the financial crisis during periods of global instability, including the Arab Spring.
"In fact, growth was 86% in the buoyant years between the start of 2004 and the pre-crash peak in March 2008, higher than the 65% rise since the post-Lehman Brothers low in March 2009 when London property gained its status as a defensive investment.
"Whatever the rationale, prime central London growth eclipses the 25% registered by the Nationwide UK house price index over the same period and beats other investments, including the FTSE 100 share index, over a ten-year period marked by the largest financial crash since the Great Depression."
Transactions increased across all price bands, including a 33% jump in property from 1 million - 2million, an 88% rise in homes worth 4million-5million and a 42% increase for 10million-plus property.
"Across the whole of the UK, more than one million properties changed hands last year, the highest number since the start of the credit crisis, according to the Halifax Building Society.
House prices rose 1.1% in January and 7.3% from November -January than a year earlier.
Halifax housing economist Martin Ellis still has concerns about the lack of supply coming on to the market at present.
"With the supply of properties being slow to respond to more buoyant market conditions, stronger demand has resulted in continued upward pressure on house prices".
Jeremy Duncombe, Director of Legal & General Mortgage Club, says overseas investors are helping to boost prices. "In the South East and London the market is being boosted by several factors such as constricted supply and foreign buyers, thus pushing prices up."
Adrian Bishop, Editor, OPP Connect