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Fringe of prime emerging property markets in London expected to lead growth

Demand in South West London continued to be driven by sales, mainly flats, below the £937,500 threshold, following changes to stamp duty at the end of 2014, according to the latest quarterly report from real estate firm Douglas and Gordon.

In contrast, larger houses priced above £1.3 million in emerging prime were muted, compounded by the stamp duty issues and mortgage market concerns. In some areas, such as Battersea and Battersea Park, some prices were down 10% year on year.
Clapham and Southfields led price increases in the sector, up 3.5% and 3.9% respectively. A weaker second half in 2014 means that for these areas prices have caught up to where they were 12 months ago.
Rental growth was also strong, up 1.7% in the quarter, continuing the areas robust performance during a difficult year in the sales market. However, this growth is expected to slow once the sales market picks up.
Overall total returns, capital and rental growth, remain attractive for professional investors in emerging prime and capital values are expected to climb 10% in the next 12 months.
‘Whereas there is some evidence of a post-election bounce, unsurprisingly many are taking their time to make decisions and a continuation of the anticipated bounce needs to be tempered with a dose of realism,’ said Ed Mead, the firm’s executive director.

He expects the market for more expensive family homes to remain firm in the next 12 months due to the prospect of a mansion tax that affecting the market before the election now no longer there.

But he pointed out that volumes are still very thin and the firm’s emerging prime index is only back to where it was 12 months ago. His prediction is for fringe areas to perform best as buyers search for new up and coming areas to buy in.