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Investors benefitting from booming London property

Tuesday 9th July 2013

The Crown Estate - owned by the Queen – recently announced that it made a record profit in the year to March, thanks to the strong performance of its central London property portfolio. But Her Majesty is not the only investor benefitting from the rise in property values in the capital.

The improving economy has given the property market in London a boost. Increasing availability of credit, marginal rises in employment and Osborne’s flagship help-to-buy scheme have all contributed to signs of growth in both transactions and prices.

Prime Central London house prices are growing at their fastest rate since the financial crisis of 2008, with provisional figures for Q2 2013 showing quarterly growth of 4%, bringing annual growth to 10.2%.

Property consultants Cluttons, reports that improved sentiment in the capital in terms of both the economy and job prospects, which are both showing signs of growth, have spurred even more buyers to step into the market or make a long overdue move.

While the supply of properties for sale in London sits at a record low, with Londoners keen to retain their exposure to the capital's market, demand for property has grown with an increase in overall job numbers, which now stands ahead of the economic peak. There has been a particular acceleration in highly skilled and highly paid employment, which is quickly translating into demand for high value homes.

According to Prime London Central (PLC), Prime London Central (PLC) remains the premier place to invest in property in the UK. The average price in the region has now breached the £1.5 million barrier for the first time to stand at a new high of £1.512 million.

These figures should be treated with caution, however. The performance has been buoyed by an increased number of high value sales above £5m. In this price segment, transactions rose from 15 to 27, representing an 80% increase over May 2012. In fact, throughout the UK, all but one sale above £5m took place in PLC. The most expensive sale was a terraced house located in Upper Brook Street, Westminster. This went for £27 million. The most money paid outside the capital was £7,883,364 for a terrace house in Sandwell, West Bromwich.

A recent report by Zoopla Property Group showed a significant rise in property millionaires, with over 300,000 properties, in total, having crossed the threshold. Land Registry data also demonstrated a rise in £1 million+ transactions of 15% since last year. Interestingly, however, only one sale above £5 million took place on Zoopla’s ‘20 most expensive streets’ in May. This was on Grosvenor Crescent for £12.75 million.

“Whilst it is clear that there is no glass ceiling when it comes to prices in Prime London Central, it is worth noting that only 27 sales took place above £5m. With so few transactions every month in PLC (just 525 in May), these top-end deals do tend to mask real average prices. When these sales are excluded, the average price of property in PLC falls to £1,061,194. In fact, 1/3 of all sales took place in £500,000 - £1 million bracket,” said Naomi Heaton, CEO of London Central Portfolio.

Lettings:

Lucy Morton, senior partner and head of lettings at Prime Central London estate agency, W.A.Ellis, offers us an insight into the existing state of the rental market in prime central London:

We are noticing increased supply in lettings, and provided properties are presented in first class condition, they continue to let at premium rents. In the first quarter of 2013, there were over 26% more properties available to let than in the same quarter in 2012. Interestingly, rental stock has increased by 32% for properties under £1,000 per week, by 12% between £1,000 and £2,000 per week and by 8% over £2,000 per week.

City job losses have had an impact on demand for rental properties, and there is a threat of a further 12,500 job cuts over 2013, taking the total number lost since 2007 to circa 118,000. Just 12 months ago, severely restricted supply meant that properties were letting quickly and void periods were reduced; however, the average time between properties being marketed and let has increased to 11 weeks from 9 weeks at the same time last year.

“We are beginning to see the high net worth students coming to London, particularly from the Middle East, but they will return home for Ramadan in early July until August when we expect them to escape the high temperatures and return to our capital again. We anticipate that these students will reduce the high stock levels in the one- and two-bedroom area of the market.

              

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