The current critical shortage of property and continued strong demand are expected to drive prices in central London up by 2.5% over the coming year, which is broadly in line with growth in 2010.
These factors, combined with anticipated improved economic conditions, are expected to deliver further positive growth over the medium term, according to the latest analysis from Cluttons in its five year residential forecast report.
Up until recently the market has been dominated by overseas investors, but buyers are increasingly being drawn from a broad base, with first time buyers, purchasers looking for pieds-a-terre, owner occupiers and overseas investors all actively seeking property in the market, it says.
Chelsea in particular has witnessed lately an upturn in activity from domestic buyers, according to James Hyman, partner for residential sales at Cluttons. ‘We are seeing very strong price growth as buyers compete for the limited supply of prime property available, which is driving the market to levels in excess of the 2007 peak,’ he said.
But the looming stamp duty increase to 5% for property over £1 million is increasingly becoming a factor, especially as the transaction must go through before the 1 April deadline to avoid the higher tax.
‘While prime central London in particular continues to benefit from overseas investors, the return of the domestic buyer to the market can in part be attributed to the return of bonuses increasing buying power, which will stiffen competition, and pent-up demand from buyers who have been waiting to re-enter the market,’ explained Hyman.
‘In many prime areas it is now cheaper to buy than to rent the same property. During the latter part of 2011 we expect further price growth, as signs of improved economic confidence emerge,’ he added.
