The price of homes in the most exclusive parts of central London have risen faster than the national average this year as the top end of the capital’s property market emerged from four years of stagnation, writes Friederike Tiesenhausen Cave.
Values of flats in Kensington, Chelsea and Westminster rose 1.1 per cent and house values 3 per cent between the first and second quarter.
This compares with a 0.8 per cent increase for all property in England and Wales, Land Registry data show.
The average price for a flat was £491,000 whereas the average price for a house – whether detached, semi-detached and terraced – came in at nearly £1.4m.
Prime central London property was hit when the stock market bubble burst in 2000, but has since recovered. According to Knight Frank, the estate agents, the prime central London market has consistently outperformed the mainstream London market over the past year and has shown positive growth since January.
The market for prime property is very different to the wider housing market. Mortgage rates play only a minor role as the market is propped up by a larger proportion of cash buyers, city bonuses and, crucially, foreign purchasers.
Knight Frank said more than 40 per cent of the estate agent chain’s sales of prime central London property were to foreign nationals, with European buyers accounting for more than 20 per cent of the total.
The share of Middle Eastern buyers had also sharply increased recently to 9 per cent, which in part reflected higher oil prices.
Many people working in the sector have recently displayed more than just the usual professional optimism about London’s prime property segment, arguing that it could do better than the remainder of the property market in the near future.
Richard Donnell of Savills Research said: “The central London market is showing signs of fair value and will be the best performing part of the housing market over the next three to four years.”
Naomi Heaton, chief executive of London Central Portfolio, a specialist residential property investment company, said the market’s shortage of housing stock and the 2012 Olympics would all help to stimulate growth.
However, the top-end of the market is not immune to downturns. Prices fell in the housing depression in the late 1980s, but the prime market moved both into and out of the doldrums about three years ahead of the rest of the country.
