A new investigation has suggested that demand for plus £1m but under £2m properties in London will remain strong in the next decade, with the city’s population forecast expected to grow by 100,000 per year over the period.
The report from Knight Frank predicts that as house prices grow across London, new markets will be created where properties go over the £1m threshold.
Annual growth in London’s prime market fell to 1.7% in August, with changes to stamp duty dampening demand. Additionally, the number of £1m plus sales were down by 21%in the year to April 2015.
Additionally, house price growth in prime outer London dropped to 3% during August, with annual rental value growth falling to 2.5% in prime central London. Prime outer London saw levels dip to 1.2%, due to high stock levels.
This said, new areas are coming into the prime market. Knight Frank’s report shows that these new areas include Hammersmith, Maida Vale, Queen’s Park, Muswell Hill and Vauxhall.
Analysis focuses on postcode districts where at least 20% of sales have been £1m in at least one quarter since the beginning of 2014.
Hammersmith has seen five quarters that have exceeded this sales number, making it the area which has undergone the largest transformation in terms of £1m plus sales.
‘Though it has been an unsettled 12 months, the sub £2m market has been more immune to recent political and economic events, particularly as this price bracket sat beneath the threshold for the proposed mansion tax,’ observed Tom Bill, head of London residential research at Knight Frank.
Bill believes that, ‘this market is more closely linked to domestic UK demand and the health of the country’s economy and it is easy to forget the fact the recovery has been stronger than many predicted, underlined by strong GDP data in July.’
‘In a further recent sign of the improving outlook, cash bonuses in the 2014/2015 financial year were up 2.7% on the previous year and just 0.1% below their record level in 2007/2008. The result is that price growth below £1 million and between £1 million and £2 million has been stronger than the average in prime central London and prime outer London,’ Bill added.
Demand for prime property in London to stay high
Further data from the report shows that properties below £1m rose by 17.5% in prime central London and 21.3% in prime outer London, during the two years to August 2015. Properties valued between £1m and £2m grew by 15.7% in prime central London and by 18.5% in prime outer London during the same timeframe.
Since the increase in stamp duty in December, demand has been better for under £2m properties. There were 3.6% more viewings in the below £2m level prime London market between January and July of this year, in comparison to 2014.
Bill believes that, ‘demand for London property at below £2m million is set to remain strong, with the city’s population forecast to grow by more than 100,000 every year for the next decade. As house prices grow across London, it will create new markets where properties cross the £1m threshold.’
‘The strength of the UK’s economic recovery means demand is poised to pick up in September, a theory reinforced by the recent performance of markets more closely aligned to the UK economy. For the above reasons, price growth in prime London will be steady rather than heady in the coming months,’ Mr Bill concluded.