The Growth of house prices in Central London

house prices in central london

House Prices in Central London

Numerical Facts

Average house prices in Central London grew circa 12% between Q3 2012 and Q3 2013. At the same time transactions were 40% higher. Values in the West End, Mayfair and Marylebone market rose by circa 14.5% in 2013. Marylebone was very active in 2013, although average prices per square foot remained 35% below those of Mayfair. In this year overseas investors bought 32% of sold properties.  Clerkenwell and City prices rose by 10% and transaction levels increased by circa 25%. In 2013 yields have softened from 4.4% gross yield on average for flats to 4.1%. Clerkenwell and City has become an attractive area for Asian overseas buyers, particularly investors from Malaysia and Singapore.

Average Sale Price Tiers of the London Market at Electoral Ward Level

  • Top 10% tier:
    Average sale price: £1,184,000
  • Average tier:
    Average sale price:  £459,000
  • Bottom 10% tier:
    Average sale price: £191,000

 Sources: Savills Research, The Property Database Ltd, HMRC & CML.

Other positive numbers

In 2013 lending has reached the highest level since 2007. What is remarkable is that in its ten year history the business confidence monitor has increased for five consecutive quarters.

Outlook for 2014

The consensus outlook by agents for house prices in Central London for 2014 is that there will be a 5% increase of house prices in Central London and a 10% in Suburban London.

Stock levels have remained low throughout 2013 so the market anticipates that these low stock levels will support price appreciation over 2014.

Transactions levels are much lower than the 2007 peak, but they are forecast to increase over the next three years. These transaction levels will be strongly dependent on an improvement in the availability of funding, the availability of mortgage finance. Having said that, cash transactions, according to Savills, account for 35% of all sales in 2013

Purchasing power by currencies

There is a strong purchasing power of overseas buyers by currencies. These are the rates on which the following currencies have appreciated against Sterling over the past 5 years:

7% Euro, 5% US Dollar, 31% Australian Dollar, 15% China Renminbi, 7% Japanese Yen, 5% Hong Kong Dollar, 20% Singapore Dollar. It is clear that the currency play advantage is one of the key drivers for overseas investors, as the Sterling remains low by historical standards. No wonder London is the fastest growing European city and it is expected to grow by at least one million people in the next decade.

Overseas buyers

As Savills has recently mentioned overseas buyers in prime markets have increased in the last decade but not above levels that have been seen previously, as in the 1980s and 1990s. It is reflective of the growth across the board of house prices in central London. 35% of all Londoners were born overseas, not just the ones that are buying property.

A significant proportion of overseas buyers, circa 22% of the total, buy property to let it out. Therefore overseas buyers are more likely to be landlords than occupiers.

Most overseas buying concentrates in Prime Central London. 85% of sales in new build property were to overseas investors. Examples of high profile schemes are: The Lancasters and One Hyde Park.

Sources: Winkworth, Savills Research, The Property Database Ltd.

By Joseph Rocafort
Pinta Investments Surveyors & Valuers