Strong International Demand Drives London Prime Property Market Boom - Knight Frank

Natasha Taghavi

5 November 2012

Prime property market prices continue to grow, according to real estate firm Knight Frank, with a rise of 0.8 per cent revenue in October, according to the latest research by Liam Bailey, the firm's head of residential research.

London’s prime residential market continues to boom, with a current annual growth of 10.1 per cent, supported by a continual monthly ascent since November 2010, standing 52 per cent above the post-financial crisis low of March 2009.

International demand for luxury property continues to attract foreign wealth investment from international buyers in the midst of the eurozone crisis and the “Arab Spring”; such investors are driven by the view that such a move will create a “safe haven” for their assets. Buyers are also motivated by a desire to hold such assets at a time of concerns about possible rising inflation.

In their recent Super-Prime London report 2012, Knight Frank found that prices in the £10 million-plus market rose 9.4 per cent in the 12 months to August 2012, with 67 per cent of buyers in the super-prime market having come from overseas in the past two years.

Among prime residential areas, Marylebone sees the highest annual rise, with a growth of 14.5 per cent. Other strong areas include the City (3.5 per cent), Islington (3.4 per cent) and Belgravia (3.2 per cent). Price growth in this year to October saw flats (11.1 per cent) outperforming houses (8.4 per cent) in terms of growth. Given the increase in stamp duty, homes in the sub-£2.5 million price band have seen the strongest price growth both on a yearly and monthly basis.

As reported last month, market growth continued despite the impact of the March budget’s 40 per cent rise in stamp duty for homes valued at £2 million or over and the prospect of new rules for an annual charge on £2 million-plus properties held in certain ownership structures. Although the UK finance minister dismissed the idea of introducing a “mansion tax” during the Conservative Party conference, the talk of such a tariff on £2 million-plus homes has created some uncertainty.

At the start of this year, Knight Frank forecasted a 5 per cent growth for prime central London prices in 2012, however the firm predicts to end the year higher, by around 8 per cent.