Spring 2012, The year has started on a positive note for both the Central London sales and lettings markets with increased levels of activity recorded across both divisions. However, despite the three year anniversary of historically low interest rates at 0.5% a growing sense of realism has been witnessed during the first quarter. This caution has stretched to the upper end of the market which remained largely immune in 2011, impacted by the ongoing economic uncertainty.
That said, forecasts for both markets remain positive for 2012, although a growing divergence between prime and secondary product is projected to emerge within the sales market throughout the year. The Olympic Games will be the key driver behind forecast growth within the lettings market.
PRIME CENTRAL LONDON SALES MARKET
After a slow start to 2012, the prime Central London residential market gathered momentum in late January with activity levels reportedly returning to average long-term levels. Encouragingly, in recent weeks a significant number of properties have come to the market, providing a welcome addition to the very restrained stock levels evident across the Capital. However, despite this rise the market is still way off plentiful stock levels.
“Best in class” product continues to command premium prices and indeed is setting precedents in terms of values which now stand well above 2007 levels. That said, purchasers are becoming increasingly selective across the market, including properties over £5 million.
Viewing numbers across our five Central London offices rocketed by 256% between the end of December to end of January 2012, with Holland Park and Marylebone offices witnessing particularly notable increases during the month. Consequently, the ratio between viewings and offers across Central London as a whole improved from mid February and has maintained its level since.
Activity within the £2 - £5 million bracket slowed during Q4 2011 although has since picked up pace into 2012. Availability of properties up to £2 million remains in very short supply and consequently when product comes to the market, irrespective of quality, it tends to sell immediately.
Pricing for properties over £5 million has held firm since the beginning of the year, although has been subject to a growing sense of caution with purchasers becoming more price conscuious.
In contrast to recent demand profiles, English purchasers have become more active within the market since the start of 2012 and have been responsible for a recent flurry of activity, principally at the top end of the market. This activity has followed a long period of monitoring and speculation, with London’s continuing “safe haven” status undoubtedly assisting in their decision to progress.
Despite the growing sense of realism across the market, demand is forecast to remain buoyant during the year and values for prime product are projected to rise by 5-7% by the end of 2012. There continues to be huge expectations on values achieved, particularly in Mayfair, with a number of new developments expected to quote between £4,000 - £4,500 per sq ft (a staggering 30% above record levels achieved in 2007). That said, a growing divergence between the best and the rest is predicted to emerge, with secondary product, particularly over £2 million, beginning to stagnate.