The change in the fortunes of the best London locations is reflective of the slowdown in the wider UK housing market.
Price growth was very healthy in the first half of the year, with average prices in prime London areas standing nearly 4% higher in June compared to January. From June price growth has been very much slower with September’s negative figure being the first decline in prices since June 2003.
Liam Bailey, Head of Residential Research at Knight Frank, comments: “We obviously should not read too much into one month’s figures, however on the back of effectively zero change since June it is clear that there is a marked slowdown in price performance in prime London.”
The top end of the market (£3-4m) has shown great resilience over the last quarter with growth of 1% pushing the average price above the level of two years ago (£3,578,571). This follows a fall in average prices with top end buyers behaving more cautiously during the Iraq War.
In the third quarter of 2004 the average price for properties in the £2m and below bands fell by 0.6%. Although prices for these properties were less affected by the war, interest rate rises in the first half of the year did have an impact, as a higher proportion of these properties will be funded through mortgages.
For all prime properties, UK residents accounted for almost three quarters of purchasers in the third quarter of the year. However, above the £5m mark the proportion of British purchaser fell to just over half of the market while Russian purchasers increased to represent 16%.
Liam Bailey explains: “The upper end of the London market performs differently partly due to the nature of people buying. The importance of international purchasers increases in line with property prices, for example there is a far more cosmopolitan mix of purchasers above £5m.”
Liam Bailey comments: “Houses faired worse during September, with an average fall of 0.5%; flat prices were actually stable over the month. The difference appears to relate to the dearth of quality flats and apartments on the market at the current time which is helping to underpin prices.”
“The worst performance was seen by house prices in the fashionable areas of Kensington and Notting Hill, where average prices fell by 1.2%. The best results were seen in prices of flats in Mayfair, St John’s Wood and Regent’s Park with increases of 0.4%, equivalent to average monthly growth of £9,730.”
Noel Flint, Partner in Knight Frank’s Sloane Avenue office comments, “The small reduction in the Index reflects the air of uncertainty currently pervading the market. However, this is a small fall and if the current shortage of quality property continues, it is hard to see how prices will fall any further. We have an unprecedented level of enquiries for properties at the top level of the market which demonstrates that London is still regarded as the leading residential address in the Western World.”
