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UK buyers returning to the prime property market in London

Prime rents in London have increased by 14.1% over last three months and 21% in Mayfair, according to the latest research from Beauchamp Estates. There was also an upsurge in demand for the Regent’s Park area with strong sales in Cornwall Terrace, Hanover Terrace and York Terrace.

Buyers are currently attracted to the availability of good housing stock and proximity to the West End and Grosvenor Square appears to be returning to its residential roots as embassies move out of Mayfair. The square’s most expensive property, a 3,600 square foot flat on a long lease, sold in March for £15.5 million.

It also found that there is continued demand for short term lets, particularly from the Middle East, especially Saudi Arabia, the United States and Russia.

Overall sales up 25% for the first five months of 2013 compared to same period in 2012 but there were far fewer sales recorded over £35 million.

National estate agency Strutt & Parker’s Chelsea office has seen some significant changes in the sales being achieved and the level of the market. Although activity levels are similar to last year, sales of property under £2 million have rapidly increased to up to 38% from 9% last year and sales volumes above £5 million are down by 19% compared with 2012.

Despite all the talk of an influx of foreign buyers, in the last quarter 70% of trades were to English buyers. Some 15% were to European buyers and 15% to Middle Eastern buyers. Also 28% of purchases made under £2 million were made by buyers in their 20’s or 30’s.

‘The market was much busier in the second quarter of 2013 after a slow start to the year. We believe activity in the lower core market will continue throughout much of the summer when typically the domestic house market slows down in August,’ said Harry Wigram, partner at Strutt & Parker Chelsea.

‘We expect the autumn market to return to normality after the summer holidays as long as London doesn’t experience the terrible weather it did at the beginning of the year, which kept a lot of our reliable international buyers far away,’ he added.

Stephanie McMahon, head of research for Strutt & Parker pointed out that the most dynamic prime markets at present are Chelsea, South Kensington and Fulham. ‘This is where we see the highest sales volumes. It is also one of our youngest markets, with both vendor and buyer groups being predominantly from the 30 to 39 age groups, perhaps not unexpected in a strong family market,’ she said.

Another trend over the past year is the decline of property developers within the market. In the year to December 2012 almost 40% of sellers were developers but in the most recent period of year to June 2013 that figure had fallen to 19% with those in finance being the most dominant group. It is also a more domestic market than say Mayfair and Belgravia, with 70% of vendors and 63% of buyers are from the UK.

Meanwhile, the summer Market Intelligence report from Crayson covering the W14, W11, W10, W8 and W2 postal areas says there was a 27% increase in sales of properties over £2 million and 229 new instructions per month, a 127% rise on the 101 properties per month reaching the market in the first half of 2012.

‘The market's been almost as hot as the temperature with transactions rising steadily this year. And whilst overseas buyers have continued to invest in London, we've seen a noticeable increase in UK buyers, helped by improved confidence in the mainstream market,’ said Nick Crayson.

‘Across our area, prices have risen 7.9% in the last 12 months. Homes in Kensington, Westbourne Grove and Bayswater have performed particularly well with prices per square foot now over 30% higher than in 2010,’ he explained.

However, he pointed out that transactions are taking longer to complete with three to four months between exchange and completion now a realistic timescale. One of the major stumbling blocks has been sellers struggling to find a suitable property to move to.
The firm also reports an increase in UK buyers in prime London and says that government support for increased mortgage lending has had an effect on the mainstream market which in turn is leading to an increase in activity across the whole UK residential sector, including the traditionally less mortgage reliant prime markets.

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