UK Property – The 3rd consecutive month of price falls in Prime Central London

Key Highlights:

• Prices for prime central London residential property have fell by 1.6% in July, the third consecutive month of price falls
• Annual growth has fallen sharply, but is still positive – properties are now worth just 1.8% more than at the same point last year
• Super-prime properties, worth more than £10m, continue to defy this trend – prices rose by 1% during July and annual growth for this segment is now 16.7%
• The northern area of prime central London – from Mayfair to St John’s Wood – is also showing slightly positive growth of 0.6% over the last month
• Houses are holding their value, and are still showing positive annual growth of 5.1%, compared to -0.9% for flats

Liam Bailey, Head of Residential Research at Knight Frank, comments:

“Values for residential property in prime Central London have now dropped for three consecutive months. Prices have now fallen by 4.7% over the past three months, the largest quarterly fall recorded in the history of our index. This has not yet quite wiped out the rapid value gains seen in 2007, and annual growth is still positive, at 1.8%.”

“Sales volumes have been a particular victim of the slowdown. Almost 50% fewer homes were sold in prime central London in July compared to the same month in 2007. New instructions have also fallen, and properties are now achieving on average less than 95% of their asking price.”

“Over recent months, we have noted that the super-prime sector has been untouched by the downturn. In July, it has become apparent that the value of properties worth more than £10m are becoming even more divorced from the rest of the market, rising by 1% over the month. Super-prime annual growth now stands at 16.7%.”

“In contrast, homes worth under £3m are now worth up to 2.6% less than they were in July 2007. This sector is traditionally dominated by high-paid City workers. Mounting concerns over future remuneration packages have combined with the well-publicised difficulties in the mortgage market and lack of confidence in the wider market to markedly reduced demand from these sources.”

“Meanwhile, the commodities boom is continuing to create vast amounts of wealth for ultra-high net worth individuals around the globe, who still regard London’s most exclusive postcodes as a highly desirable place to live or own property. They are joined by select hedge fund managers whose earnings have scarcely been scratched by the credit crunch.

“As a result, the average price of properties sold in central London has increased drastically over recent months, as the top end of the market significantly outperforms. Houses, few and far between in prime Central London, are in particular demand, and are holding their value better than flats. This may also explain strong performance in the northern parts of the central area, where entire houses are more common.”

“Despite the current gloom, there are signs of life in the wider market. Properties are now staying on the market for less than 60 days before sale – the lowest level for six months. This may indicate that vendors are finally becoming more realistic and accepting the new market conditions.”

“Also, viewings continue to take place at historically high rates, indicating that the appetite for prime London property is not hugely dented – but rather that buyers are waiting for the market to stabilise before making a move.”

“The situation is unlikely to change until the mortgage market eases and the economic outlook improves. Therefore, further price falls are probable – confined to single figures if the market begins to ease, but potentially more significant if the global outlook deteriorates.”

Courtesy: Knight Frank Residential Research

Knight Frank area definitions:

Prime central London is taken to include: Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank (from Westminster Bridge to Tower Bridge/Shad Thames)

Prime London is taken to include all the above plus: Canary Wharf, Hampstead, Richmond, Wandsworth, Wapping and Wimbledon.

For further information, please contact:

Liam Bailey, Head of Residential Research, Knight Frank
Tel: +44 (0) 20 7861 5133
Mob: +44 (0) 7919 303148
Email: [email protected]

Davina Macdonald Lockhart, Knight Frank, residential pr
Tel: +44 (0) 20 7861 1033
Mob: +44 (0) 7796 996154
Email: [email protected]