Prime central London property prices are recovering strongly, according to two new reports.
Three good months
Residential prices in prime central London rose 1.7% in June, the third successive monthly rise, according to the latest Knight Franks Prime Central London Index. Prices rose even more – by 1.9% – in the most expensive sector, those properties that sell for more than £10m.
For the whole of spring – April to June – prime central London prices rose by an impressive 3.7%, the largest rise over a three month period since September 2007.
Still cheap
Prices remain low, though, compared to the heights they reached during the 2007 boom. On an annualised basis, they lost 17.2% of value in the year ending June.
The recovery in prices has been led by a sharp fall in the number of properties on the market: there were 29.2% less homes for sale in June this year than there were in the same month of 2008. Meanwhile, there was a 14% rise in the number of potential buyers. Viewing volumes were also up, by 7% over the year.
£10m homes lead the way
Liam Bailey, head of residential research at Knight Frank, says: “The central London market recovery has continued for a third month in succession. Price rises last month were led by the £10m plus sector, which saw prices rise for the first time since the downturn began.
“This is a significant shift in the market, as the rises seen over the past two months had been led by the sub-£1m and the £1m to £2m sectors. We have noted growing confidence from the wealthiest buyers in recent months – in terms of viewings and offers and this has now translated into actual sales.
“The biggest growth in £10m+ applicants over the past three months have been Russians and Europeans – especially those from Greece, Italy, France and Spain. There is some urgency from eurozone buyers – keen to secure the benefit they are seeing from the weakness of sterling.”
Bailey remains optimistic for market conditions during the summer, despite the prospects of sterling strengthening against the euro in coming months. He reports growing interest from Middle Eastern buyers.
Investors returning
London Central Portfolio Ltd has also found growing commitment from investors in prime central London properties that are now regarded as selling at below value. The company invests in portfolios of properties on behalf of a range of investors. It aims to achieve a 15% annual return and reports that over the long-term, investment in prime properties has exceeded the returns on equity investments.
The company says that recent falls in prices create strong investment opportunities. It argues that with property assets now selling at 20% below recent prices, its ‘Recovery Fund’ – which is currently buying-up properties in Knightsbridge, Mayfair, Chelsea and Kensington – stands to show a strong return. Purchased properties are let to corporate tenants while they add value.
“In 2008, the lack of investor appetite globally, provoked an unprecedented softening of prices in the prime areas of London Central,” says Naomi Heaton, London Central Portfolio’s chief executive. “In 2009, as confidence returns, coupled with a new desire to invest in tangible assets rather than financially engineered products, London Central is back on the map.”