A lot of agents were very conservative in their assessment of the 2011 market. Douglas & Gordon originally predicted a 5% growth rate in London for the year and Savills advised -1%, but last month, the latter revised this to an 8% growth for Central London after the market continually exceeded expectations.
This trend is continuing and despite the volatility surrounding the wider economy, there seems to be no stopping the Prime London market. Prices in Prime Central London have continued to increase again in Q2 2011. The growth rates are almost reminiscent of 2006 with a Q2 growth of 5.8% and this, combined with the previous quarters’ growth, takes the total for 2011 to date to 10.8%.
There are of course anomalies to this exceptional growth, though these anomalies are still on the rise. The South West London market as a whole has not shown considerable growth (with the exclusion of the prime hotspots of Wimbledon Village, Kew Green, Richmond and Wandsworth Common) having increased by a mere 1.7% in the quarter, whilst by contrast, Wimbledon Village has increased by as much as 12% or even 15% in the last 9 months.
Again, prices are being driven up by very strong demand, including a continuous stream from Middle and Far Eastern investors, which exceeds the limited supply of properties. To date, supply is down by over 30% from 2010.
This is having an upward effect on Prime London rents which are displaying similar growth, although this may start to change. Landlords will have to become more realistic and flexible as supply returns to the market, diluting previously strong rents over time due to decreased competition. In the current market though, rental growth has been impressive in Prime London, with rental prices rising 5.4% in the quarter.
Historically, the majority of growth in the London market occurs in the first half of the year. We do not expect the same growth in Quarter’s 2 & 3 and therefore we may witness a rebalance in pricing in the second half of the year. It will be interesting to see how far buyers’ minds will be rattled by US economic policy and how far this affects house prices in London and the UK.