Three bedroom properties in the prime London market see prices rocket in last year

The value of three bedroom properties in the prime London market have increased by over £700 a day in the last year, new research shows.

The growth represents £729 per day and is the equivalent to a quarter of a million pounds in just 12 months, according to the latest London Property Monitor from March & Parsons.

It means that three bedroom properties in prime London have appreciated by 19% in the last year, to an average current price of £1,670,339 and prime London property overall has risen by 4.3% in the last quarter, and 12.9% in the last year.

The firm points out that if prices were to continue to rise at the current rate of 4.3% per quarter, the average price of a prime London property would exceed £2 million by 2016.

Also, a huge surge in UK buyers in the last quarter, indicates that high price rises are not just fuelled by overseas buyers.

A large part of the increase was gained in the last three months, after a strong 6% quarterly rise increased the average value of three bedroom properties by an extra £93,231. This follows three strong quarters of growth in the past year.

‘These are extraordinary times for the Prime London property market. Smart buyers can earn more money from their house in a year than by going to work in a very well paid job.  With returns like these, it’s easy to see why people are queuing up to buy prime London property,’ said Peter Rollings, chief executive officer of Marsh & Parsons.

‘It’s always difficult to call the top of the market. But while comparisons are being drawn with 2007, the current conditions are actually remarkably different. It’s difficult to see how prices can fall while demand for property remains so high,’ he explained.

‘Compared to the same point last year, we have seen a 20% increase in demand and a 25% fall in the supply of property. Prime London is still a strong sellers’ market and jackpot prices are fast becoming the norm,’ he added.

The areas of prime London which have experienced the fastest rate of growth in the last quarter were Balham, Clapham and Brook Green. In the last year, the average price of property in these areas has increased by 26%, 25% and 17% respectively.

‘It’s staggering to think that the average price of a property in Prime London could be more than £2 million by the end of next year. But while this is possible, experience tells us that the majority of house price growth usually falls in the first half of the year, so the actual rate of growth over the next year is likely to stabilise towards the end,’ said Rollings.

He pointed out that areas of South West London, such as Balham and Clapham, where demand for property is intense, are fast becoming hotspots for young families and first time buyers eager to get onto the property ladder.
‘The popularity of these areas also reflects the more affordable price bracket. The average price of property in outer prime London is around half that in the more central areas,’ he added.

In the last quarter, there has been a huge surge in the number of UK buyers purchasing Prime London property, and a marked decrease in the number of overseas and foreign nationality buyers. UK buyers made up 78% of all prime London purchases in the three months to April.

In prime central London, which includes the areas of Kensington and Chelsea and is typically a stronghold for overseas buyers, the proportion of purchases by overseas and foreign nationality buyers has fallen to a two year low, with 21% of purchases made by this group in the last quarter. This is considerably less than the medium term average. During 2012 and 2013, overseas and foreign nationality buyers accounted for around 40% of all purchases.

‘These figures show that, contrary to popular belief, the prime London property market isn’t just being fuelled by overseas money. Increased legislation aimed at foreign investors is causing widespread uncertainty across the market and threatens to blemish the UK’s reputation as being open for international business,’ said Rollings.

‘But the reality is that, until other forms of investment become more attractive, prime London property will continue to be seen as a rock solid investment, akin to a global reserve currency. With the changes to pension funds announced in the Budget, we may continue to see an increase in UK buyers and pension fund investors operating in the capital, in search of rental yields and long term capital growth,’ he added.