Central London Property Market Remains Buoyant
Despite the fragile state of the economy, the residential property market in London continues to go from strength to strength, which explains why so many investors are currently buying property in London and why house builders are falling over themselves to develop more new homes in the capital.
Property values in prime areas of London have increased by a staggering 12.8 per cent in the past year, following a rise of 3.6 per cent during the first quarter of 2013, according to central London property consultantsMarsh & Parsons.
With mortgage borrowing rates hovering at an historic low, many property experts expect residential prices in prime central London to increase further moving forward, thanks to a hike in demand among those buying property in Hyde Park, Baker Street, Marylebone, among a host of other prime areas in the capital.
Unsurprisingly, the proportion of purchases by investors in prime London has increased from 17 per cent to 25 per cent in the last quarter.
Peter Rollings, CEO of Marsh & Parsons, commented: “Homeowners have seen their equity soar as a result of such significant price growth in the past few years. We are now seeing many of those seizing the opportunity to sell at prices that have recovered and in many cases exceeded the highs of 2007, and then re-invest in the same market, taking advantage of the historically low mortgage rates available due to the funding for lending scheme.”
Anyone buy property in London should be aware that new property taxes affecting high value residential dwellings have been introduced.
The new taxes affect properties worth over £2m which are owned by UK or non-UK resident companies, as well as certain other kinds of entities.
“If a property was worth less than £2 million on 1 April 2012 then it will be outside the ARPT [annual residential property tax] until the next valuation date on 1 April 2017,” said a spokesperson at leading estate agents Napier Watt.
Aside from strong prospect for capital growth, many property investors are also acquiring homes in London with a view to taking advantage of rising rental values.
KinleighFolkard& Hayward report that across its network of over 50 branches in London, rents have increased by an average of five per cent compared with the same time last year. In further evidence of pressure on prices, the average monthly rental price currently being achieved is £1,538 in comparison to £1,476 seen in 2011.
Along with increased rental prices, tenancy lengths are also on the rise. The average length of tenancy at KinleighFolkard& Haywardhas risen from 14 to 15 months year on year.
James Thornett, regional lettings director at Hyde Park estate agentsKinleighFolkard& Hayward, commented: “The lettings market in London is experiencing huge amounts of growth as it becomes increasingly difficult for buyers to get onto the property ladder.”
As property prices and rents continue upwards, it is no surprise to see a sharp rise in the volume of planning applications submitted by house builders to develop new homes in London.
The latest analyses from CBRE shows that there were 6,548 units in Central London awaiting permission in the first quarter of this year, up 116 per cent compared to the 3,023 new homes applications recorded in the last quarter of 2012. However, this still leaves London far short of the Mayor's target of producing 20,000 new homes per annum.
Mark Collins, Chairman of Residential at CBRE, said: “The enduring appeal of London has outweighed negative sentiment, as shown by increasing sales of high value homes. In addition to the success of traditional prime boroughs, new build homes are being purchased at an extraordinary rate.”
The increase in planning applications to develop new homes in London will please London Mayor, Boris Johnson, who recently formed a London housing delivery panel, worth up to £5 billion over four years, designed to boost the supply of residential properties in the Greater London Authority.
