Its quarterly prime central London index which covers central areas from Mayfair to Holland Park and Chelsea to St Johns Wood had expected to show the market slowing after a significant slow down last quarter, coupled with rising stock levels.
Its prime all London index, which includes central, southwest, northern and east of city areas, also resumed growth after a flat 0.2% in the last quarter of 2010. It showed a price rise of 2% in the first quarter of 2011.
‘The level of price growth this quarter was unexpected and our forecast for 2011 now looks bearish,’ said Yolande Barnes, head of Savills research.
Growth was seen across all prime locations and price bands, but with higher ticket properties most in demand. The average price of Savills transactions in the first quarter of 2011 rose from £3million in 2010 to around £5million, with houses significantly outperforming flats. This reflects a continued surge of wealthy overseas buyers bringing foreign equity into the capital from all corners of the globe.
In the last quarter, there was a shift in the profile of overseas demand with increased activity from Middle Easterners and Russians buying homes for their own use on the back of a strong oil price. Last year it was European investor buyers who were in the ascendancy on the back of a strong Euro. Whatever the specific nationality, low sterling exchange rates since 2008 have attracted all buyer types into the market.
‘Clearly stable real estate markets like London’s are attracting purchasers in the face of global uncertainty and investment market volatility. Prime central London dwellings can act as a store of global wealth in the face of unexpected global events,’ explained Barnes.
But she said there is still a question mark over whether these asset price rises will continue if global conditions stabilise. ‘Low stock levels together with a rush to beat the stamp duty deadline have also undoubtedly contributed to price growth in the last quarter so we will not race to review our forecasts. We will be watching to see if the market has the fundamental strength to sustain this momentum over the coming months,’ she added.
For now, values show no sign of softening. ‘There remains strong evidence that London retains its global city status and appeal as a safe deposit for international cash generated in more economically and politically volatile markets. Increasingly, these buyers seem to be viewing prime central London property as a gold standard asset,’ said Barnes.
Such has been the flow of equity into and within the capital that houses have significantly outperformed flats across the market. Average prime London house values rose by 3.4% in the quarter compared to 1.6% for flats. ‘The result is that the average price of houses in our index currently exceeds peak values, albeit by a slim half percentage point margin, while flats remain 10.6% below their peak value,’ Barnes added.
The report also shows that extreme stock shortages in certain locations mean there have been some very significant price gains over the past few months. Central west locations including Kensington, Holland Park and Notting Hill, outperformed all other locations, with prices up 4.3% in the quarter. As a result, demand has been strong across the value spectrum from £2 million to £15 million.
Domestic buyers account for some 80% sales in Fulham, Wandsworth, Barnes, and Putney and in Islington and Hampstead. In these areas too, some 65% of buyers have come from the financial and business services sector where renewed confidence has clearly had an impact.
In prime southwest London prices rose by 2.2% to leave average prices within 0.5% of their peak level and family house values ahead by 2.2%.
