London's 'safe haven' status is continuing to attract a higher number of homebuyers from across the world, which is placing greater pressure on the city's acute housing supply crisis, pushing property prices higher in the process.
The situation is most acute in the heart of the capital, with the average price of a home in central London now 13 per cent above the previous market peak in early 2008, according to Knight Frank. This reflects high buyer demand coupled with a severe shortage of property for sale in Marylebone, Mayfair, Kensington and Fitzrovia, amongst other sought-after areas.
The situation is most acute in the heart of the capital, with the average price of a home in central London now 13 per cent above the previous market peak in early 2008, according to Knight Frank. This reflects high buyer demand coupled with a severe shortage of property for sale in Marylebone, Mayfair, Kensington and Fitzrovia, amongst other sought-after areas.
"London still remains a key destination for investors looking for 'safe-haven' assets, a fact reflected in the continued rise in interest from prospective buyers, up 23% in the three months to July compared to the previous quarter," said Liam Bailey of Knight Frank.
Increasing the supply of new build properties is central to dealing with some of the major problems facing the housing system; government has a critical role to play in enabling home builders to meet the country's housing need, particularly in central London.
For example, any house hunter searching for a house for sale in Mayfair or a flat for sale in Fitzrovia will find that there is very little stock on the market and this is underpinning prices in central London.
Jennet Siebrits, Head of Residential Research at CBRE, said: "London is still a bright spot in the UK residential market with a lack of supply and strong interest from international buyers looking for a safe haven for their money underpinning house prices."
A recent report compiled by property consultants CBRE shows that over the last decade London's population has grown by 850,000 whilst only 197,000 new homes have been constructed in London over the same period.
Reflecting on the growing supply-demand imbalance in the capital. Andrew Ellinas, Director of leading central London estate agents Sandfords, said: "The property market in central London is continuing to motor away from the rest of the UK."
The rise in property prices is also rippling out to leading secondary locations, such as St John's Wood.
Located a short walk from Baker Street, St Johns Wood is considered to be one of the most popular neighbourhoods to live in London. It generally attracts a high level of demand from homebuyers - reflected by the lack of houses and flats for sale in St Johns Wood - making it one of the most expensive places to buy property in the UK.
It does not take a property expert to realise that prices in the capital are likely to rise unless more new homes are built in the foreseeable future.
The latest Housing Market Sentiment Survey from Zoopla.co.uk reveals that 63 per cent of homeowners expect house prices to rise between now and the end of 2012. This time last year, only 57% of homeowners expected an increase in property prices in the second half of the year.
"Homeowners evidently feel that there are some grounds for optimism, despite the backdrop of slow economic growth and tight mortgage lending," said Nigel Lewis of Zoopla.co.uk.
