The firm’s Residential Property Forecasts Quarter One 2012 report also indicates that the rental market is now returning to normal levels with 1% growth expected this year.
It predicts stronger than usual growth in prime central London ahead of the Olympic Games this summer, combined with falling prices in commuter towns and the wider UK, will create opportunities for people wanting to move out of central London.
Cluttons sees no immediate relief in sight from the lingering supply drought gripping the capital and says that strong domestic and foreign buyer demand will maintain pressure on prices this year.
Cluttons anticipates that the majority of the 2 to 3% growth forecast in central London this year will be concentrated in the first half of the year, in the run up to the Olympic Games.
This presents a real window of opportunity for homeowners in prime central London to take advantage of above average growth, at a time when prices elsewhere are subject to falls. Nationwide reports that prices in outer metropolitan areas within Surrey, Hertfordshire and South Buckinghamshire, fell by 1% between the third and fourth quarters of 2011. Cluttons predicts price falls of 2 to 3% in the rest of the UK this year, with unemployment expected to peak at 9.4%, spurring an increase in distressed sales.
‘Outside London's prime market, price growth and demand will remain relatively weak, with risks to the economy such as uncertainty over Europe impacting confidence. Prime central London, on the other hand, continues to see robust demand and price growth, with an upturn in enquiries from buyers in Greece and Italy who are seeking the security of a London investment, which is worsening the supply drought,’ said Sue Foxley, head of research at Cluttons.
‘London home owners, who have been biding their time before making a move to the suburbs, can benefit from perfect conditions over the next three months, when we anticipate the majority of this year's London price growth will take place before the Olympics push the property market onto the backburner,’ she explained.
‘Prime central London sellers can take advantage of prices close to or in many cases slightly ahead of the pre recession peak and strong demand to secure a quick sale, which, combined with falling prices in the suburbs, will enable them to trade up to a much larger property,’ she added.
The report also indicates that the central London rental market saw a slow start to the year, with a sharp reduction in new job starters who normally form the bedrock of the capital's tenant demand in the early months. However, demand has improved since late January, driven in part by recruitment activity in the oil, gas and IT sectors and to an extent the financial services sector, despite ongoing redundancies.
‘Rental growth is returning to its trend rate following the unsustainable bubble of rent rises we saw last year, with 1% growth forecast for 2012. Falling budgets have resulted in a growing number of sharers and a flow of tenants moving to cheaper locations. This said, pressures on housing supply and continued affordability issues in the capital will continue to drive rental growth over the coming years,’ said Foxley.
