The recovery in upmarket London house prices has begun to stall as demand from buyers has declined, following 15 consecutive months of price gains, property agents said this week.
Prices for prime London property fell 0.5 per cent in July, the first monthly decline since March 2009, according to estate agency Knight Frank.
In the past year, property prices rebounded strongly in central parts of London, driven by a lack of supply and strong demand from overseas buyers attracted by the weakness of sterling.
Buyers from the eurozone, Hong Kong and the Middle East were able to achieve effective reductions of 30-50 per cent on London house purchases, thanks to the relative strength of their domestic currencies.
But prices rises began slowing in the spring. Data from estate agency Savills showed that while annual house price growth to the end of June 2010 for prime central London was 12.3 per cent, growth in the March to June quarter was just 0.6 per cent.
“There’s definitely a softening in demand,” said Lucian Cook, head of residential research at Savills. “But it’s not going to be a cataclysmic 2007-08 scenario. It’s the fact that the prime market grew quite unexpectedly last year and that’s clearly not sustainable.”
Savills has revised its annual forecasts downwards, as a result. It has maintained its forecast that prime central London will see a 1 per cent fall this year, but expects growth of only 0.5 per cent in 2011, compared with its previous forecast of 7 per cent.
Liam Bailey of Knight Frank said the slowdown in the London market has been anticipated for several months. “The market experienced a severe lack of houses for sale during late 2009 and early 2010, which helped push prices higher,” he noted. “Since May, demand has fallen back by 8 per cent and supply has also risen (by 7 per cent) as vendors look to take advantage of higher prices.”
However, agents said sellers of prime London property are still being too ambitious in their asking prices – even though research from Zoopla.co.uk, a property search website, has found that the asking prices of homes across the UK have been cut by an average of 6 per cent since they were first listed.
Bailey said most agents believe that asking prices are between 5 per cent and 10 per cent higher than where the actual market is at the current time.
Andrew Giller of The Buying Solution, a property buying agent, said a number of buyers are now taking a more considered approach to their property purchases. “Many are currently in no rush to buy, so they are happy to wait if their perception is that a property is overpriced – which could explain the slight price declines reported,” he said.
However, Giller said he
was currently experiencing
an “exceptionally high demand” for properties in the £1m to £3m price bracket, predominantly around London’s Hyde Park. These largely represent investment acquisitions, particularly by Middle Eastern families wanting to take advantage of rental opportunities.