The most dramatic growth, however, has been in non central areas as relative lack of supply has pushed buyers and property investors further afield, according to the data from estate agent Marsh & Parsons’ latest London Property Monitor.
The average premium being paid for properties in prime central London now stands at 43% more than the price being paid for the equivalent prime London property, a 4% drop from the previous year.
But the firms says that given the increasingly favourable mortgage rates available to those with higher loan to value ratios, growth in prime central areas is expected to catch up with that of its outer neighbours before long.
Prime London has now been outpacing central London for the past three quarters, by experiencing consistently higher quarterly growth than its most central parts alone.
There has also been a shift outwards for investors who are looking to profit from purchases in rising areas such as Battersea where rents have increased by an average of 6% in the past quarter.
The proportion of purchases by investors in prime London has increased from 17% to 25% in the last quarter, while those purchasing in prime central areas has decreased steadily for the last three quarters to just 7% in the first quarter of 2013.
‘Home owners have seen their equity soar as a result of such significant price growth in the past few years. We are now seeing many of those seizing the opportunity to sell at prices that have recovered and in many cases exceeded the highs of 2007, and then re-invest in the same market, taking advantage of the historically low mortgage rates available due to the funding for lending scheme,’ said Peter Rollings, chief executive officer of Marsh & Parsons.
‘The relatively low increase in the value of prime central London property, compared to its non central neighbours, means that there’s never been a better time to buy in prime central London. The enduring appeal of a classic home in a central location will never go out of fashion,’ he added.
As a result of property price growth, the number of properties in the capital now worth £1 million or more has increased dramatically. In March 2013 some 46% of properties in prime London were million pound homes, a figure that has risen from 43% in December 2012, and 37% in March 2012.
The firm believes that many home owners in prime central London are now rushing to take advantage of these substantial value increases and cash in their capital gains to trade up into bigger properties. Home buyers upsizing in prime central London accounted for 36% of all moves in this area in the first quarter of 2013, a 25% increase from the previous year.
By comparison, the proportion of first time buyers has not changed significantly in the past year. In prime central London the percentage has decreased by 4% in the past year, while in prime London overall the proportion has grown by 4%.
The firm points out that the stark contrast with these figures against the proportion of those trading up suggests that many lenders are still channelling increased rates from the Funding for Lending schemes towards less risky borrowers with higher loan to value ratios.
‘While some argue that increased stamp duty on higher value homes is affecting the value of properties over £2 million, it’s reassuring to see the number of million pound homes in the capital continue to flourish. We are continuing to see record levels of properties at this value and there is no sign of it stopping,’ concluded Rollings.
