The ripple effect in London

The well reported boom in prime central London in the past two years has left many property sellers, and of course estate agents, elated, as a lack of supply against growing demand has pushed prices across most parts of the capital’s best central areas higher.

The Savills Prime Central London Index showed average price growth of 87 per cent in the six years to mid-2011, with the highest capital growth recorded in Mayfair, to the delight of Mayfair estate agents.

Savills report that Mayfair outperformed the rest of the capital on price growth, up 117 per cent on average in six years,

Residential property prices in London have demonstrated a distinct spatial pattern over time, rising initially in a cyclical upswing in prime central London before spreading out to secondary locations.

Despite the recent lull in the UK property market, Savills claim that there has been a recovery in the market in many parts of London, with mainstream prices having increased by 25 per cent, on average, in the past six years.

Property consultants Knight Frank have identified a number of hotspots in London, including many secondary areas, which are expected to boom in the next few years.

The company expects prices to increase by an average of 30 per cent in prime areas by the end of 2015 but with some neighbourhoods seeing far greater gains.

Grainne Gilmore, head of UK residential research at Knight Frank, said: "The prime London property market is buoyant, but there are pockets of London where the opportunity for development, and other factors such as improved transport infrastructure, gentrification or regeneration, combine to produce real opportunities for housebuilders and ultimately for those in need of housing."

Many Paddington estate agents are bracing themselves for potential growth in demand for Paddington properties to both buy and rent, after it was outlined as an up-and-coming corporate hub.

Richard Kauntze, Chief Executive for the British Council for Offices, highlighted Paddington as one of a select few areas outside the main London business districts which is growing in popularity.

He said that attitudes towards Paddington, previously perceived as being "fringey", had "really changed with the Paddington Basin development," he commented.

"Some significant business office occupiers have moved in [to Paddington] and it is an area that is very close to the centre of London," Mr Kauntze added.

Rising demand for office space in Paddington is contributing towards the gentrification of the area and making it a more popular place to live.

"The capital continues to soar away and outperform the wider UK property market and is seen as the world's safest haven for bricks and mortar," said Andrew Ellinas of Sandfords.

He continued: "An acute stock shortage and unprecedented buyer demand in prime areas such as Regent’s Park and Marylebone is helping to underpin prices by as much as 10 per cent in the last 12 months."

But while many buyers compete to take advantage of excellent rental returns yields and the prospect for strong capital growth in areas like Marylebone and Regent's Park, some property experts believe that greater returns could be achieved in nearby areas that potentially offer greater room for growth.

Lisson Grove estate agents have long claimed that properties in Lisson Grove are cheap, in comparison to nearby areas, which also includes St John's Wood and Baker Street.

But whether more shrewd property investors will look beyond prime central London and invest in secondary locations is another matter. Only time will tell.

Primrose Hill property prices tipped to rise further

The property market in primary parts of London is widely expected to defy the anticipated downturn in the mainstream UK residential property market in 2012, according to various property experts.

The latest forecast from estate agent Knight Frank shows that property prices in prime central London, areas including Regents Park, Kensington, Primrose Hill, Knightsbridge, St John's Wood, South Hampstead, among others, will continue to climb next year.

Knight Frank project that prime central London prices will increase by an average of five per cent in 2012, before pausing in 2013 and rising by a further four in 2014. Cumulatively, the property consultancy believes that prices will appreciate by 24 per cent by the end of 2016.

Liam Bailey, Knight Frank's head of research, said: "Prices in prime central London are currently at an all-time high, despite which we believe there is scope for further price gains over the next 12 months, averaging 5 per cent across 2012."

Estate agents in primary destinations, including Mayfair estate agents and South Hampstead estate agents, generally agree that geo-political issues will continue to push overseas buyers into London, especially at the top end of the market, as the capital is seen as a safe haven.

Bailey added: "The reasons which have underpinned recent growth – a weak pound, renewed wealth-creation in emerging markets, the search for safe-haven assets and flight capital – all seem set to continue, at least in the short term, reinforcing our positive view for next year."

It is not just estate agents that are confident about the state of the central London property market.

According to research conducted by Jones Lang LaSalle, residential property developers are resolutely confident about the outlook for the market in 2012 and do not foresee a major impact from the global economic crisis.

Their latest survey found that 84 per cent of developers thought that central London apartment prices in core locations would increase next year.

Neil Chegwidden, Residential Research Director at Jones Lang LaSalle, who undertook the research, commented: "Our survey confirms that developers remain positive and confident about the outlook for the central London residential market despite the overhang of gloomy economic and financial market news."

Strong appetite from overseas buyers is seen as being the key to this projected growth in property prices.

There has been a major hike in demand for property for sale in Primrose Hill, for example, which is unsurprising, given that this is one of the most sought after parts of the city to live in.

Leading Primrose Hill estate agents, such as Sandfords, report that property prices in Primrose Hill have recorded double-digit growth in the past two years, mainly due to rising interest among people wanting to live in this area.

"Overseas buyers are particularly keen to invest in the Capital especially since the Eurozone crises, with many properties sold going to cash-rich Europeans looking to move some of their wealth into the stability of the prime London property market," said Andrew Ellinas of Sandfords.

With Primrose Hill perceived to be one of the most popular and safest places to live in London, Adam Feather, managing director of local estate agents, Robert Anthony, reports that demand among homebuyers to "buy property in Primrose Hill" has intensified in the past two years.

He added: "Primrose Hill's popularity has culminated in a rise in the volume of people looking to live in the area, fuelled by greater interest from buyers abroad."

"Primrose Hill property prices are now at an all-time high and look set to grow further," he concluded.

Fitzrovia estate agents achieve record price for local area

A new build home at Crabtree Place, the luxury development on Whitfield Street, Fitzrovia, recently achieved a record price of £1,500 per square foot for a residential property sold in Fitzrovia, a sought after part of central London.

The recent sale of the penthouse, situated within a derelict power station, which has been transformed into a small collection of seven triplex homes and apartments, has set a new level of pricing for Fitzrovia.

The one-off duplex apartment, accessible via a direct secure-access lift, has been impressively designed. The top floor apartment benefits from plenty of natural light from the wrap around terrace, which offers impressive views over London’s skyline and the treetops of Crabtree Fields below.

The penthouse offers impeccably designed space with state of the art audio-visual systems, under floor heating and discreet mood lighting to create a pleasant living environment.

The success of this property scheme supports claims by Fitzrovia estate agents that demand for properties in Fitzrovia is growing at a rapid pace.

John Ennis of Foxtons estate agents, the appointed estate agent for Crabtree Place, said: "Combined with its excellent location near the vibrant hubbub of Charlotte Street and Fitzrovia, it is no wonder we have applicants from every continent interested in this development [Crabtree Place]."

It is not just the market in Fitzrovia that is booming. With very few homes on the market, property prices in nearby Regents Park are also on the rise, supported by a high level of demand for property for sale in Regents Park, particularly from overseas purchasers.

"London is holding up well despite gloomy reports from the most of the rest of the UK," said Andrew Ellinas of leading estate agents Sandfords.

Harrods Estates, the luxury estate agents arm of the Harrods Group, has announced plans to head to Hong Kong in November to attend MIPIM Asia 2011, with a view to selling homes in Regents Park, among other prime central London locations, to buyers in the Far East.

The weak UK pound and increasing property prices have made the London property market extremely attractive to South East Asian buyers, with popular areas like Regents Park and Fitzrovia, amongst those reaping the rewards.

Figures provided by estate agency Savills reveal that purchasers from South East Asia accounted for 35 per cent of new development sales in London, with the Chinese particularly active in London at the moment.

Shirley Humphrey, Sales and Marketing Director for Harrods Estates, said: "This is a particularly interesting time in the Central London property market. Whilst traditional buyers and renters from North America and Europe are finding their domestic economic situations constricting their property investment decisions, it is precisely the domestic environment in South East Asia that has shown a 15 per cent increase in sales to the [London] region by Harrods Estates over the last six months. In 2010, 40 per cent of our sales came from Asia."

High property prices and a lack of mortgage liquidity are forcing more and more people into renting. With demand for property to rent in Regents Park at a historic high, rental prices are increasing at a rapid rate; an attractive proposition for buy-to-let investors, including those in the far East.

More properties in Little Venice needed to satisfy high demand

The Government is being urged to do more to increase the supply of properties in popular parts of the capital, such as Little Venice, a tranquil canal area in West London, near Maida Vale, because there are nowhere near enough homes to cater for high demand for both properties to rent and buy.

The Home Builders Federation (HBF) has told the Government to "stand firm" on its planning proposals to help property developers increase the supply of new homes or risk a 'house building ice age'.

Speaking at the recent Housing Market Intelligence conference HBF executive chairman Stewart Baseley said the "complete and utter nonsense" of the anti-development lobby must be ignored or a generation of people will be denied access to the housing market.

Located just north of Paddington, Little Venice, home to a number of waterside cafes, pubs and eateries, is a highly popular place to live, illustrated by the high number of prospective purchasers and tenants registering with Maida Vale estate agents with a view to securing a property in nearby Little Venice.

But with so many people actively looking at property for sale in Little Venice with a view to buying a sought after home, property prices in the area are widely expected to increase in the short to medium term.

Andrew Ellinas of Sandfords, a leading local estate agent, believes that demand will continue to grow, while supply is expected to remain sluggish, which should place upward pressure on residential property prices in Little Venice, among other prime parts of the capital.

"The Centre for Economics and Business Research [CEBR] believes the acute housing shortage will combine with pent-up demand from people who have deferred buying for fear prices will drop still further. Prices will rise as a result," said Mr Ellinas. [CEBR] predict a 16 per cent rise [on average across London] by the end of 2015."

In addition to a shortage of properties for sale, a lack of property to rent in Little Venice is also expected to cause further growth in rental prices in the area.

The latest data released by LSL Property Services, which owns various estate agents and letting agencies, shows that the average rental price of a home in the private sector in England and Wales increased by 0.7 per cent in September. Average rents in September hit a new high of £718 per month, led by growth in popular London districts, such as Little Venice.

David Newnes of LSL said rents were being pushed higher by growing demand from people seeking rental accommodation, partly because many would-be property purchasers are unable to access mortgage liquidity needed to buy a home, while the growing supply-demand imbalance is also having an impact.

"In many cases, buying a home is now cheaper on a monthly basis - provided renters can get past the stumbling block of the substantial deposit requirements," said Mr Newnes. "For the majority, saving a £25,000 deposit is a Herculean task as inflation and rents climb - and most would-be buyers are biting the bullet and prolonging their stay in increasingly costly rental accommodation."

He added: "As things stand, we won't see competition amongst prospective tenants diminish without a substantial expansion in the supply of rental properties available on the market."

Little Venice is a charming and tranquil area away from the hustle and bustle of nearby central London. But unless greater investment is made in the local area to increase supply and meet growing demand for accommodation requirements, sale and rental prices will simply continue to grow.

Dominic Agace, CEO of M Winkworth PLC, commented: "Rents continue to rise as the fundamentals continue to put upwards pressure on rents. Simply put, investment in the sector is not keeping pace with growing demand for accommodation requirements."