The latest report from estate agents W A Ellis shows that average prices per square foot increased by 20% in prime addresses such a Knightsbridge, Belgravia and Chelsea in the last six months.
It reports strong interest in properties with development potential. A property which would have achieved £1,700 per square foot six months ago is now likely to be worth around £2,000 per square foot. Many developers are now basing their projections upon a price point of £3,000 per square foot, it says.
‘The property market in prime central London stalled somewhat during April due to the bank holidays and the Royal Wedding, but during May, we saw the market return to its full strength. We now have double the amount of properties for sale than we had in April, a welcome influx as stock levels were depleting,’ said Richard Barber, partner and head of residential sales.
‘As is customary for the time of year, we have experienced an increasing number of foreign nationals coming to purchase or rent properties in London during May, particularly from Russia, Italy, France and the Middle East. London property appeals to foreign investors because of the continued weakness of Sterling, the expected continuation of capital growth and ever increasing rental yields,’ he explained.
‘Despite the tight lending criteria, the strong market has resulted in an increasing number of investors showing high levels of interest in properties with development potential and the possibility to maximise square footage. Basement excavations continue to be popular, but buyers are increasingly concerned about ceiling heights and natural light,’ he added.
Although high premiums are being achieved for good quality properties, the agents expect poorly presented or secondary properties to languish during the summer months if they are too ambitiously priced.
‘It is important for agents to provide fair and realistic valuations based upon their knowledge of the local market rather than overvaluing simply to gain instructions,’ said Barber.
The outlook is positive. ‘Throughout 2011, it has been obvious that prices in prime central London have risen exponentially in comparison to the rest of the country, and I would expect this growth to continue for the remainder of the year,’ he added.
According to Lucy Morton, senior partner and head of lettings at W A Ellis, rents continue to rise, but there is more movement in the market which is understandable for this time of year. ‘June and July are typically the changeover months for many expats. Stock levels in London have increased marginally since this time last year when they were at an all time low. The sharp rate of increase on renewals has slowed down as the main adjustment in rents occurred during 2009 and 2010 when prices picked up after the credit crunch,’ she explained.
‘The ever increasing levels of tenants in the market are from all parts of the world. Middle Eastern enquiries continue to flood in but we have also noticed an influx of Russians. Some first time renters moving here for the first time and others upgrading and security is the order of the day. Many are coming to the UK to educate their children in the public school system,’ she said.
‘With the Bank Holidays now behind us, we anticipate that June will be a frenetic month as tenants rush to find their ideal property with the limited stock available,’ added Morton.
