UK buyers drive prime London residential market price surge

Knight Frank Prime Central London Index, October 2009

  • Prime house prices in central London rose 2.1% in October
  • The annual rate of price change has improved to -3.2% (from -8.8% in September)
  • Average prices are still 16% below their March 2008 peak
  • Price growth in some areas has hit 13% since March this year

Liam Bailey, head of residential research, Knight Frank, commented: “The central London housing market has experienced an extraordinary period in recent weeks. A shortage of property for sale (down 20% year-on-year), a weak pound which has encouraged overseas buyers (overseas prospective buyers have risen 45% year-on-year) and the return of bonuses to the City all contributed to pushing prices up by 2.1% in October, the fastest monthly rate of increase since July 2007.

“Prices are now 10% higher than they were at the low reached in March this year, although they are still 16% below peak levels (March 2008). However despite the revival of international buyer interest – the undoubted driver of strong price growth in recent months has been the return of the UK buyer, in particular those employed in the ‘City’.

“UK buyers represented 67% of all £5m+ buyers in the three months to the end of October, compared with only 43% in the preceding three months.”

Market sector performance

The market rise has been led by Chelsea, Kensington and Notting Hill – where prices have risen by nearly 6% in three months – almost £1,340 a day for a £2m property.

The strongest performing price bracket continues to be £1m-£2.5m – which has risen 5.3% in three months. The top price bracket (£10m+) has begun to see some life (with a 1.9% rise in price in October) after a slow recovery during the first nine months of 2009.

While there was anecdotal evidence of rising stock volumes in September – this failed to materialise in October. The number of new properties being brought forward for sale in October was almost 60% below the level seen in October 2008 and 58% lower than September this year.

Record prices

In the last month, Knight Frank has handled four £10m plus sales to UK, Russian and Chinese buyers – three in Belgravia with asking prices of £16.25m, £17m and £32m and one in Knightsbridge with an asking price of £11.5m.

In Kensington, prices for individual properties in Academy Gardens have risen 25% since 2007. A two bedroom flat recently achieved £1832 per square foot having previously sold in June 2007 for £1400 per square foot.

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