As a safe harbor for investors worldwide, London’s prime property is holding its value while overall UK prices are slipping. Despite a smaller pool of interested buyers, the lure of owning a slice of scarce commodity is sustaining demand for residential London real estate. See the following article from Property Wire for more on this.
Prime property in London is showing much greater resilience than the rest of the UK’s real estate market showing much smaller falls in the final quarter of 2010, a new report shows.
While the Nationwide UK House Price index is currently showing average falls of 2.0% for the three months to the end of November, the Savills quarterly prime central London index is showing falls of just 0.2% in all prime London over the past three months.
This includes all the capital’s top residential locations, bounded by Hampstead and Islington in the North; Richmond and Chiswick in the West; Wimbledon and, Clapham to the south; and Canary Wharf and the Isle of Dogs in the East.
In the most central locations in this area comprising Mayfair, Belgravia, Knightsbridge, Chelsea, Kensington, Notting Hill, Holland Park, St Johns Wood, Regents Park and Marylebone, average values actually rose very slightly, by 0.4% over the quarter, following a fall of 0.1% in the third quarter.
‘The defining characteristic of the prime central London market is its ability to act as an equity funnel. Not only is it the first port of call for domestically-generated money such as City bonuses but the prime London market attracts large amounts of capital from all over the world,’ said Yolande Barnes, head of research at Savills.
Barnes believes that the world’s billionaires buy global real estate in a similar way to gold as a store of wealth and a hedge against political instability and diminution of wealth in a, perhaps less stable, homeland.
‘London is unique even amongst the leading global cities where international wealth is held in real estate. In central London, it is possible to own houses freehold, thereby buying into a limited commodity. Physically owning a piece of London’s land, as well as the building on it has an emotional appeal unavailable in the apartment-dominated real estate markets of other global cities,’ she explained.
This may help to explain why, even in the prime market, house values are outperforming flats. In the prime central London area houses saw a quarterly increase of 0.9% compared to prime central London flats, which rose by 0.2%.
‘There is only a finite supply of houses in the capital and only a minute proportion of new stock is being built as houses. Savills research shows that once bought by investors and occupiers from overseas, properties are far less likely to return to the market, so it is becoming more difficult for buyers to source stock in the central areas. This rarity factor will underpin values in the core central locations and beyond their boundaries. This all but guarantees that London’s prime market will expand to new areas,’ said Barnes.
In this last quarter there was diverse demand for flats and houses in all prime areas, which resulted in the biggest quarterly increase being seen in prime north London, that is Hampstead and Islington, where houses which were up 2.5% on the quarter, although flat prices in the same area fell by 2.7%.
In the traditionally more domestic areas of prime south west London, prices have also risen 1% this quarter compared to a 0.3% in the third quarter. Again, the demand appears to have been for houses in this area too which rose by 2.4% compared to a fall for flats of 0.3%.
‘The performance of London’s residential markets appears to have defied standard demand indicators. The numbers of people looking for property have fallen significantly over the year but those that remain appear determined, with the result that both transactions and prices are holding up. It would appear that the best London properties do not require large numbers of applicants but rather the right, few, highly motivated buyers, to whom the globally scarce stock has a significant and enduring appeal, not least as a safe deposit,’ added Barnes.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.