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  1. Wealth
November 4, 2011

Knight Frank: Prime London property up 38% since March 2009

By Spear's

Prime central London prices have hit new record levels, rising nearly 40% since March 2009

by Josh Spero

Headlines for October 2011

•    Prime London property prices rose 0.7% in October 2011, contributing to annual growth of 12.5%
•    Prices have risen 38.2% since their post-credit-crunch low in March 2009
•    Prices are now at a record high, 5.2% higher than their previous peak in March 2008
•    The volume of new sales instructions has fallen by 6% over the past year, while the number of new applicants is down by 11%
•    While the number of exchanges is lower, the volume of sales being agreed has risen by 12% over the past year suggesting more exchanges in the pipeline

Prime central London prices have hit new record levels, rising nearly 40% since March 2009. Liam Bailey, head of residential research, examines how this market has shrugged off global economic uncertainty and continues to post strong results.

Price growth in the prime central London market continued through October with a further 0.7% rise. Prices have been rising strongly since April 2009, and are now more than 5% higher than their previous peak in March 2008.

As we noted in last month’s results the only impact from recent European and global financial and economic market turmoil has been to push more buyers into the central London market.

Our analysis of market activity in the three-month period to October, compared to the same period in 2011, confirms that sales being agreed are up by 12% over the past year.

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Despite this strong showing from sales volumes, and on-going positive movements in pricing, there are some indicators pointing to more subdued conditions in the market.

On the demand side new buyer volumes have slipped by 11% over the past year, and viewings are down by 8%. While this slowdown in demand is partly offset by lower stock volumes, which are down 14% over the same period after a 6% decline in new instructions, there does seem to be a noticeable trend towards a more cautious approach from buyers.

Our forecast for the prime central London market in 2012 is for positive price growth, but at a slower pace than we have seen over the past two years – we are expecting a rise of 5% across the whole of next year, compared to strong double-digit growth this year.

We note in our recent forecast report that the London market has benefited from a weak pound and growth in global wealth portfolios, demand for international educational opportunities, and demand for ‘safe haven’ assets on the back of recent geo-political concerns.

In our view it is the diversity of demand for prime London property that has been a significant strength for the market, and a key factor behind our relatively positive outlook. Looking ahead there is a strong likelihood that geo-political issues will continue to push overseas buyers into London, especially at the top end of the market. The forthcoming Russian election in 2012 has already spurred increased activity from Russian buyers, and the ramifications of the Arab spring are still not fully played out – buyers from this region are still looking to invest in London.

We believe the medium-term outlook for central London pricing is positive, with our forecast showing cumulative growth of 24% in the five years to 2016, supported by a recovering global economy and expanding wealth portfolios from 2013 and beyond.

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