London property market expected to defy national downward trend

It is booming and blooming in the UK property market if you know where to look. Activity in the property market may have slowed in recent months causing a dip in nationwide home prices, but there is one region of the country that continues to defy the market slump, and that is the capital city of London.

The latest property price index released by LSL Property Services and Acadametrics shows that the capital was the only region of England where residential property prices increased in December 2011, thanks to strong demand for property for sale in London.

The index reveals that the average price of a home in London appreciated by 0.6 per cent in December compared to the previous month and by 3 per cent against the corresponding month in 2010.

LSL Property Services commercial director David Brown said: "Prices in London have bucked the national trend, not falling in any of the last six months, and growing annually by three per cent."

Activity in the London property market has been strong thanks to an influx of foreign buyers and a rise in the number of landlords looking to take advantage of high demand for property to rent in London by adding to their buy-to-let portfolios.

Estate agents offering property for sale in Marylebone, Knightsbridge, Kensington & Chelsea, Mayfair, among other parts of prime Central London property, will agree that the property market in this part of city is particularly attractive due to a chronic housing shortage coupled with strong demand from wealthy homebuyers.

Such is the shortage of houses and flats for sale in Marylebone for instance, many would-be purchasers are prepared to rent in the short-term in order to bide their time until the right property becomes available to buy.

This is placing even greater pressure on a high level of demand for property to rent in Marylebone, driving rental values up in the process; an attractive proposition for buy-to-let property investors.

John Heron, managing director of Paragon Mortgages, commented: "Buy-to-let is making huge progress and we are seeing solid, steady levels of growth. 2012 will be another interesting year for the buy-to-let market, and we need to continue to build on the success of 2011."

Andrew Ellinas, director of leading estate agents Sandfords, which offers a wide selection of houses and flats to rent in Marylebone, says that the mood in central London is rather upbeat despite the sluggish nature of the market across most parts of the country.

He commented: "Everyone thinks the value of their house has gone down in the last few months, except in London, where things are very different. Property prices remain stable and vendors who seriously want to sell are doing so very quickly if the price is realistic."

The strength of the property market in Marylebone appears to be rippling out to highly desirable secondary destinations in London.

The property market in Little Venice in Maida Vale, located a short commutable distance from Marylebone, is a prime example of an area located just outside of central London, which is booming at the moment.

Anyone looking at either a property for sale in Little Venice or a property to rent in Little Venice will find that competition for the best homes is fierce, which is explains why property prices and rents are sky-high.

Furthermore, despite the uncertainty in the wider UK property market, prospects for the property market in primary and secondary parts of London continues to look positive offering good prospects for further capital and rental growth.

Director of research at Hometrack Richard Donnell said: "On a national basis house prices have not increased over the last 18 months - a theme carried over into January 2012 when prices were unchanged."

"London looks set to buck the national trend again in 2012 thanks to overseas buyers providing a boost to prices in London’s prime areas."

London property management services growing increasingly important

Many landlords take property management for granted. But with rental prices at an all-time high and demand for property to rent in London rising, more landlords need to think about offering a more professional management service in order to meet growing expectations from tenants.

Very few landlords, particularly those who also have full-time jobs, appreciate just how much work is involved with managing a property, not until they experience problems. Consequently, more landlords are now hiring London property management firms, especially if they have more than one property situated across various locations.

Adam Feather, managing director of Hampstead estate agents Robert Anthony, which offers a professional property management service, says that his firm has seen a noticeable rise in the volume of landlords turning to property companies in order to manage their buy-to-let units.

Mr Feather said: "Property management is a process that includes a lot of duties from checking tenants for credit stability, collecting rent, doing minor and major repairs. It may appear easy, but it can prove to be a serious pain and extremely time-consuming, especially if a landlord does not fully understand what is required."

Mr Feather urges anyone thinking of offering a property to rent in St Johns Wood, Hampstead, Primrose Hill or Swiss Cottage - areas in which his company operates in – to hire the services of a professional property management firm.

He added: "Landlords operating in these sought after areas in North West London should seriously consider their options because rents are not cheap and tenants expect to receive a first class service for their money".

Landlords are currently achieving weekly rental rates of £562 per week, on average, in St John's Wood, according to figures supplied by estate agents Colliers International.

London's stable and liquid housing market, supported in part by a strong private rental sector, makes it especially attractive to domestic and international property investors aiming to take advantage of high rental returns and potential future capital growth.

A new report by Colliers International states: "House prices in London have increased to pre-financial crisis levels, there has also been rapid growth in rental values across the capital."

Leading estate agents Sandfords, which offers a wide selection of houses and flats for sale in Marylebone as well as houses and flats to rent in Marylebone, along with homes in surrounding areas, report that demand for property for sale in London appears to be increasing.

"As we move into spring, we expect the market to strengthen as buyers return, attracted by the underlying value of properties in the world's capital city [London]. There's no pessimism here", said Andrew Ellinas of leading estate agents Sandfords.

Demand for homes in London is being driven in part by a rise in the volume of landlords adding to their buy-to-let portfolios in anticipation of higher rental values and yields.

Jones Lang LaSalle (JLL), a property consultancy, says typical UK rents will grow another five per cent on average in 2012, led by a seven per cent hike in London, mainly due to a lack of homes on the rental market.

JLL estimate that there will be around 150,000 more London households renting than before the financial crisis. By 2015 there could be more private tenants in London than people with mortgages.

Jon Neale, JLL's research director, said: "London's employment market remains intense and there's still strong population movement into the capital. But the stock of rented property has hardly increased over the past few years."

Central London estate agents see strong international demand

Despite a general slowdown in the UK property market, central London estate agents are still witnessing a high level of demand for properties in London, particularly in Prime Central London where there is a high level of activity among international homebuyers, pushing property prices higher in the process.

The latest figures supplied by Knight Frank show that the average price of Prime Central London residential property rose by 0.9% in January on the back of greater inquiries for property for sale in London. This latest increase pushed the three-month rate of growth to 2.7%, the highest rate since July 2011.

Annual growth now stands at 11.9%, with prices rising 42% since their post-Lehman low in March 2009.

Capital appreciation has also been driven in part by a hike in activity among property investors looking to take advantage of higher rental returns on the back of greater demand for property to rent in London.

Data supplied by estate agents Cluttons reveals that average rents increased by almost 9% between Q4 2010 to Q4 2011, reaching a level 10.3% above the market peak in Q1 2008.

'Foreign buyers, institutional investors, commercial property companies, developers and private buyers are all seeking to cash in on the high level of demand in the market. London has a stable and liquid housing market, making it especially attractive to foreign buyers who are caught up in sovereign debt issues and concerned with wealth preservation,' the Cluttons report said.

According to the report, rents in London regularly exceed £1,000 plus per week in central prime areas of London and since 2000 property values in London, in particular in the prime sector, have consistently outperformed the FTSE 100 over the long term.

Liam Bailey, Knight Frank's head of residential research, comments: "The strength of London's luxury sector, against a backdrop of economic difficulties both domestically and globally, has surprised many over the past year.

"Ironically economic and even political turmoil have provided the impetus for growth - with a sharp growth in investors looking for a safe-haven location for at least part of their wealth portfolio."

The research shows that the sector leading price growth at the current time is the £1 million to £2.5 million segment. Prices in this price range have risen 14.4% over the past 12 months.

Andrew Ellinas, director, Sandfords, said: "Here in central London, property prices remain stable and vendors who seriously want to sell are doing so very quickly if the price is realistic, but few property owners want to sell because central London property is one of those rare classes of wealth that is retaining its value in a world where inflation is creeping up and stock market yields are volatile."

Aside from viewing the London property market as a relatively safe haven from wider economic problems domestically and internationally, Naomi Heaton, chief executive of London Central Portfolio says many overseas nationals are also buying properties in London in order make it easier to send their children to British schools and universities.

"People feel very comfortable here [in London], it is a cosmopolitan society, it is one of the most visited destinations in the world, it is the centre [of the UK] geographically, financially and culturally", said Ms Heaton.