Long Term Demand For London Real Estate Is Extremely Healthy

Short supply has supported price strength for London real estate, and despite a recent tapering of growth, the City is expected to outperform the region over the long …

Short supply has supported price strength for London real estate, and despite a recent tapering of growth, the City is expected to outperform the region over the long haul. Capitalizing on currency trends, foreign investors have increased their presence, while ultra-prime properties offer great potential right now. See the following article from Property Wire for more on this.

The heat is coming out of the prime central London residential property market as values are being largely sustained by low stock levels and foreign buyers, it is claimed.

The latest published index shows prices have increased but the pace of growth is slowing. The Savills prime central London index saw a quarterly increase of 3% in the first three months of this year compared with 4.6% in the last quarter of 2009, bringing annual prime central London price growth to 16.9%.

‘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,’ said Yolande Barnes, head of Savills residential research.

‘Soundings from the market suggest that we are at or approaching a tipping point where buyers will resist pricing over the current level. The specter 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,’ she added.

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Barnes believes that the 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 center.

International buyers have become more important and now account for 60% of the prime central London market, up from the normal 50%. 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% up on this time last year, and analysts believe this is due 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.

‘The modest growth in ultra prime values, particularly relative to rebuilding of wealth that has happened over the past year, combined with a favorable exchange rate, presents a buying opportunity for ultra high net worth global buyers,’ explained Barnes.

‘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,’ she added.

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. Putney and Richmond, for example, saw exceptional growth of over 9% in the quarter after a lackluster 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.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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