The average UK home fell in value by 1 % from September 2008 to August 2009, (Nationwide). Taking into account the price decreases from September 2008 to the beginning of 2009, an overall rise in price signifies significant recovery in the central London market.
Short supply in central London protects prices
In central London, property has always been in short supply, and this is now helping to push prices up. London is a sought-after location and so demand will always be high, stemmed by the lack of stock available. Alex Thomson, Director of Winkworth Notting Hill says, ‘A severe shortage of stock continues to underpin the market recovery. Vendors are disinclined to sell for two principle reasons: they still incorrectly believe it is a poor time to sell; and low interest rates enable them to wait.’
Growing demand from cash buyers
The central London market has been sustained due to a lack of stock and growing levels of demand from cash-rich buyers. Cash buyers have dominated the central London market since the beginning of the year. These include buyers looking to capitalise on their comparative advantage over those needing financing, buyers whose money earns nothing in the bank, or buyers who are sitting on funds they would rather not re-invest in other assets just yet.
Overseas buyers also fuelling market
There has always a lot of interest in the London market from foreign buyers, and now the pound has fallen there is even more interest coming from overseas, the weakness of Sterling adding to already discounted prices. Tom Dogger, Franchisee of Winkworth Knightsbridge & Chelsea says, ‘2009 has seen a huge increase in the number of purchasers enquiring to buy central London property from overseas. This typically comprises Euro-based applicants and individuals from the UAE. Due to the difficulties faced by buyers residing in the UK attempting to secure mortgages and the instability of jobs and bonuses within the City, we have found that overseas purchasers currently comprise approximately 60% of our enquiries.’
London market shows strong recovery
London is certainly seeing a greater recovery than many other cities, although this has in most cases followed a steeper fall too, with peak to trough falls in the region of 35% in Notting Hill, for example. The sentiment of the property market has been self perpetuated with buyers reassured by other competing purchasers. Ian Fraser, Franchisee of Winkworth Islington says, ‘The central London market appears to have made a startling recovery over the last few months. Properties were selling at 25 – 30% below peak prices in the autumn of last year. That figure is now less than 10% away from the previous top of the market for better quality stock. We have registered far more buyers over the last four months than we did even in 2006 or 2007.’
