International demand for homes in prime central London continue to rise

The Eurozone crisis has continued to boost international demand for houses and flats to rent in Fitzrovia, Mayfair, Hyde Park, among a host of other prime central London locations.

 

The fact that London is generally viewed as a 'safe haven' amid the economic turmoil in the Eurozone means that more people are moving to the capital in order to escape the calamity and preserve their wealth.

But while many foreigners may prefer to buy property in London, the general shortage of homes on the sales market is forcing them to rent property instead.

"We have reached the point of no return for the housing market," said Gemma Duggan of the National Housing Federation. "Successive governments have failed to tackle the under-supply of housing and time is now running out."

 

A quick online search for a house for sale in Little Venice, for example, a west London district a short distance from Marylebone, which is generally popular with international homebuyers, shows that there are very few houses currently on the market in the area. Consequently, many people looking to buy a home in the area will have to opt for rented accommodation until more houses become available.

The shortage of properties for sale also reflects a sharp rise in the volume of people snapping up homes in prime central London.

According to estate agency WA Ellis, there was a 36 per cent rise in the number of property transactions in prime central London from September to October.

Tim des Forges, partner in residential sales at WA Ellis, said: "The first week of half term was unprecedented, and is perhaps now bringing in buyers who avoided London during the summer's events. This is illustrated by the total numbers of sales in prime central London in October, which is up by 35.81 per cent on September."

The company's letting division has also been rather busy, particular when it comes to letting homes in the £1,000-£3,000 per week bracket and more tenants are staying for longer; the average tenancy now stands at around three years, according to WA Ellis.

"These tenants are seeking two or three bedroom properties in Prime Central London, and any property that presents well is letting quickly," said WA Ellis' Lucy Morton.

Not only are more people now required to live in rented accommodation, but the resulting shortage of homes for sale means that property prices in prime central London are rising.

The latest Knight Frank Prime Central London Index shows that the average price of a home in the region appreciated by 0.8 per cent in October compared to the previous month, pushing annual growth to 10.1 per cent. Prices are now 52 per cent higher than in March 2009.

"Our analysis of market activity confirms that average prices have climbed 10.1 per cent over the past year, with flats [11.1 per cent] outperforming houses [8.4 per cent] in terms of growth, said Liam bailey of Knight Frank.

Among the areas performing particularly well in terms of price appreciation is Marylebone, which has seen a growth over the past year of 14.5 per cent – the highest annual rise of all areas covered by the index.

Property prices in Marylebone are rising on the back of a general shortage of properties for sale in the area in relation to high demand. But with many people wanting to live in the area, more people are now prepared to consider looking at a house or flat to rent in Marylebone.

 

Andrew Ellinas of leading estate agency Sandfords said: "Marylebone, with its wealth of elegant properties and desirable High Street, has been attracting affluent buyers for a number of years. Demand for properties priced between £1.5 and £4million is intense."

With demand for housing in prime central London expected to continue to rise, very few people would bet against further capital growth and rental price rises moving forward over the next few years.

Rents could soar on the back of London housing shortage

Anyone searching for a flat to rent in St Johns Wood will find that there are not that many homes to choose from. In fact, anyone looking for a home to rent anywhere in and around prime central London will almost certainly discover a dearth of properties to let due to the growing housing shortage in the capital.

Log-on to any major property portal and search for ‘houses to rent in Fitzrovia’ or ‘apartments to rent in Mayfair’ and you will see that there is a restricted selection of properties to choose from.

The growing demand-supply demand imbalance in prime central London may be welcome news for landlords, but it is creating problems for some tenants as rents continue to soar.

The cost of renting a home in England and Wales increased by 1.1 per cent in September to reach a new record high of £741, on average, per month, according to LSL Property Services. This was 1.1 per cent higher than August and 3.2 per cent up on the same month a year earlier.

“Rents have risen consecutively for half a year as tenant demand strengthens on the back of a historically subdued mortgage market,” said David Newnes, of LSL.

He added: “Every pound monthly rents go up by is another pound that renters cannot save for a deposit for their first home. This is lengthening their stay in rented accommodation, and increasing competition in the private rented sector.”

With housing supply unlikely to improve anytime soon, many experts project that rental prices across many parts of the UK will continue to soar, particularly in prime central London.

The average rent in London is set to rise to £404 per week by 2018, according to a study by the National Housing Federation.

David Orr, Chief executive of the National Housing Federation, said: “Only by addressing the chronic undersupply of new homes can we stem the financial pressure on families.”

Many would-be vendors have decided not to sell their homes and take advantage of the buoyant rental market by letting them out instead, according to Julia Garber of Sandfords’ letting division, which specialises in offering houses and apartments to rent in Fitzrovia, St Johns Wood, Marlebone and Primrose Hill.

Garber said: “High rents have rents have persuaded many property owners to remove their flats and houses from the sales market and let them out instead.”

Increasing rental values is also expected to attract more buy-to-let investors seeking to beat historically low bank saving rates.

With savers receiving dismal returns from banks and building societies in stark contrast to soaring rental prices and higher yields, more people, and not just existing homeowners, are unsurprisingly turning to buy-to-let property as a means of supplementing their income.

Adam Feather, director, Robert Anthony estate agents, commented: “Existing property market conditions in London are perfect for landlords. With many would-be property buyers struggling to gain a foot on the housing ladder, rental demand will inevitably rise further, pushing rents higher in the process. That’s why buy-to-let properties generally offer stable, low risk investment returns.”

Property sales expected to rise in prime central London

Many experts estimate that property sales could rise on the back of government efforts to help make mortgages more readily available following a rise in the number of mortgage approvals issued.

The Bank of England has announced that mortgage approvals increased following the launch of the £80 billion Funding for Lending Scheme (FLS) by the BoE and the Treasury in August designed to increase the availability of cheaper loans and mortgages for businesses and households.

So far over 20 banking groups, including the five largest lenders in the UK, have signed up to the Funding for Lending Scheme, while funding costs have fallen by around one percentage point.

Fresh data from the Bank of England shows that the volume of loans approved for property purchases increased by 2,103 to 50,024 in September, while the number of loans approved for remortgaging rose by 1,860 to 28,343.

"Market conditions are definitely improving at present," said Brian Murphy, head of lending at Mortgage Advice Bureau. "The Funding for Lending scheme is now starting to make an impact and should be of benefit to building societies as the months go on as they have remained committed to increasing their lending this year."

The latest Royal Institute of Chartered Surveyors UK housing market survey shows that expectations for future sales reached their highest level since May 2010. During September, a net balance of 26 per cent more respondents predicted transactions to grow during Q4 2012.

Peter Bolton King, Royal Institute of Chartered Surveyors' global residential director, said: "Surveyors are optimistic that the run in to Christmas could see an increase in activity in many areas of the country."

The anticipated rise in housing activity could potentially help to drive up property prices across parts of the country, particularly in prime central London and its outskirts despite the fact that property prices have already soared in the past year or so. 

In the London Borough of City of Westminster, for example, prices increased by close to 20 per cent in the year to August due to a general shortage of properties for sale in Little Venice - forms part of Maida Vale - as well as Hyde Park, St Johns Wood, Mayfair, among other parts of the borough.

"Property prices in the City of Westminster rose by an astonishing 18.3 per cent in the year to August, according to the latest figures from the government Land Registry," said Andrew Ellinas, director of leading estate agents Sandfords. "The increase is the highest in the UK by a very long way."

The jump in property values means that any house or flat for sale in Little Venice, St Johns Wood, Hyde Park, Mayfair, or any other part of the borough for that matter is now significantly higher compared to this time last year.
 

"The major shortage of houses and apartments for sale in Fitzrovia, St Johns Wood, Hyde Park, Mayfair, Maida Vale, among other parts of the City of Westminster in relation to high demand are driving property prices upwards," said Adam Feather of Robert Anthony estate agency.

With very few new homes being delivered in prime central London, it is highly unlikely that the increase in property values will slow anytime soon – not for as long as the capital continues to be seen as a safe haven to buy property.

Prime Central London property market activity picks-up

During almost six weeks of the Olympic and Paralympic Games in London, the amount of people out looking at property fell as many Britons spent time watching sporting events instead.

Research conducted by the Royal Institute of Chartered Surveyors reveals that during the Olympic Games nine per cent more surveyors reported falls in demand, in comparison to four per cent in July, illustrating the fact that Olympics was a genuine distraction for potential buyers.

"Understandably, the amount of people out looking at property fell away slightly," said Ian Perry of the Royal Institute of Chartered Surveyors.

However, with London’s golden summer now a fading memory, more people have turned their attentions back to property resulting in greater activity, particularly in the prime Central London property market.

The latest Cluttons Residential Investment Monitor report reveals that activity in the prime Central London property market has increased significantly since the Olympic Games ended helping to push property values higher.

Cluttons report that average home prices across London increased by 3.1 per cent during the third quarter of this year, after a more modest increase of 0.9 per cent in the second quarter. This healthy growth leaves average property values in prime Central London 3.33 per cent higher than the third quarter of the 2007 market peak and 7.1 per cent higher than the corresponding period last year. 

Research shows that property for sale in Fitzrovia, Mayfair, Marylebone, Hyde Park, among other prime areas are of particular interest as far as purchasers are concerned. 

Demand for flats and houses for sale in Fitzrovia, Mayfair, Marylebone and Hyde Park is particularly high among international purchasers

Investors from India, Western Europe, Russia and other Eastern European countries are increasingly focussing on properties in these areas, illustrating that foreign investors have become the dominant force in the London property market.

"The increase [in prime central London property prices] is the highest in the UK by a very long way, and justifies the interest in prime central London that has been shown by investors from around the world through the thick of the global financial crisis", said Andrew Ellinas of leading estate agents Sandfords.

But despite the hike in property values, prime central London rental values have somewhat stabilised, and in some cases have even dipped, as unemployment and the recent Olympic Games all contributed to a general market slowdown.

The latest analysis from the property adviser Savills shows that small falls were seen in prime central London rents, following a slight decline in demand for property to rent in Fitzrovia, Mayfair, Kensington, along with a host of other highly desirable centrally located areas.
 

The decline in the volume of people renting was driven by a weakening of economic indicators and the employment outlook in the financial and business services.

Sophie Chick, Savills research analyst, said: "Constrained budgets means tenants are increasingly aware of the cost of space, a trend we believe will continue."

Despite a slight fall in prime London rental demand, most experts expect activity to pick up again now that the UK is moving out of recession.

Prime Central London Property Price Growth Continues

Prices for the best residential properties in central London increased further in August 2012 on the back of consistently high demand from national and international homebuyers, according to the latest Knight Frank report.

Knight Frank's Prime Central London Sales Index for August 2012 reveals that the average price of a home in prime central London appreciated by 0.5 per cent in August compared to the previous month, taking annual growth to 9.9 per cent.

Prices have now increased by a staggering 49.9 per cent since the post credit-crunch low in March 2009, and are now at an all-time high - 14% above their previous peak in March 2008.

Liam Bailey, Knight Frank's head of residential research, said: "The strongest price growth over the past three months was seen in the £10m+ price bracket with an increase of 2.9%. The slowest growth, 1.4%, was seen in the £1m to £2.5m bracket, which could be explained by uncertainty surrounding the new stamp duty rate."

The study shows that the greatest property price rises have been seen in the likes of Knightsbridge, Notting Hill and Belgravia. This has been supported by continued demand from international buyers, notably those from Russia, India, France and Italy.

But other central London areas such as Baker Street, Hyde Park and Marylebone have also posted sharp property price gains, reflecting high demand from a wide range of home buyers, including many investors seeking to take advantage of soaring rental values.

Andrew Ellinas, director of leading estate agents Sandfords, said: "Marylebone, with its wealth of elegant properties and desirable High Street, has been attracting affluent buyers for a number of years. Demand for properties priced between £1.5 and £4million is intense, resulting in properties selling within an average of just seven days in Marylebone."

Aside from rising property prices, rents have also been increasing in these areas, reflecting high demand for property to rent in Marylebone, Baker Street and Hyde Park.

 

David Newnes, director of LSL Property Services, commented: "The rental market is also entering its summer peak, as recent graduates and those with new jobs begin to look for new accommodation. With more tenants on the move, alongside long term underlying demand, fierce competition for properties is enabling landlords to increase rental prices to new highs."

As lending to those without substantial deposits remains depressed, demand from people looking for a house or flat to rent in Marylebone, Baker Street and Hyde Park among other surrounding areas is likely to rise in the long-term - providing further upwards momentum for rents.
 

 

This is likely to push people out to secondary areas in London, boosting demand for rental accommodation in Maida Vale, Little Venice, St Johns Wood, among a host of other desirable destinations offering easy access into Central London and the West End.

This in turn will almost certainly boost activity among property investors, especially landlords looking to cash-in on heightened demand by looking at the potential flats and houses for sale in Little Venice, Maida Vale, St John’s Wood and beyond.

"Areas such as Little Venice, Maida Vale and St Johns Wood can be seen to be prudent investments. Entry level pricing is lower and rental demand continues to be strong," said Yasser Elkaffass of Adam Hayes.

 

 

Wherever investors choose to buy property in London, there are fantastic investment prospects available, subject to necessary due diligence being undertaken.

London Property Market Strengthens Further

The average price of a UK home increased by around 1.3 per cent in August, the biggest monthly rise in two and a half years, led by gains in London, according to the latest figures released by Nationwide.

Property prices are being driven upwards by a high level of property investment activity as investors seek to take advantage of high rental demand, particularly in the capital.

With many would-be first time buyers struggling to raise the necessary finance required to buy a property, a high number of people are being forced to rent property instead, pushing rental values higher in the process; an attractive proposition for shrewd investors looking to cash-in.

Steve Hicks, managing director of Genie, says that the biggest problem for first-time buyers is the need to save for a deposit on a mortgage, which is currently almost unachievable for many who are struggling with their day-to-day needs. Yet, the increase in average house prices will make it harder still.

"It is already incredibly difficult for people to get on that first rung of the housing ladder so news that average house prices are on the increase means that it will be even harder, said Mr Hicks. "Still the fact remains that the average deposit for a first time buyer in the UK currently stands at £26,000 up from £12,000 five years earlier, an increase of 117 per cent."

Investor demand for homes in London is being significantly boosted by international homebuyers, many of which are benefitting from a favourable exchange rate.

Estate agents Cluttons report that compared to the price peak in the third quarter of 2007, home buyers from the Far East are now benefitting from price discounts of as much as 60 per cent and home buyers from the Middle East as much as 30 per cent, as a result of the weakened sterling currency. With no immediate appreciation in the value of sterling anticipated any time soon, this advantage looks set to continue for the foreseeable future.

Sue Foxley, head of research at Cluttons, said: "International buyers have long bolstered demand for property in the capital, pushing up prices as the supply shortage continues."

Cash buyers, both domestic and foreign, are still very much in evidence in popular London markets, such as St Johns Wood, due to the fact that demand for property to rent in St John's Wood is far outstripping supply, pushing rents higher in the process.

Aside from good rental returns, the lack of houses and flats to rent in St John's Wood is also contributing to higher property prices, as competition between investor landlords intensifies in a bid to plug the rental housing shortage in the area.

 

Adam Feather, managing director of local estate agents Robert Anthony, said: "The continuing imbalance in demand and supply has created a competitive market in St John's Wood where many properties receive multiple offers and subsequently prices are pushed up."

Of course, it is not just St John's Wood that is attracting enormous investor demand.

High demand for rental homes in surrounding areas from people looking for a flat or house to rent in Regents Park, Primrose Hill, Baker Street, Swiss Cottage and Finchley Road, among other highly desirable local areas, is also proving alluring for investors. But with supply highly restricted, competition among homebuyers is fierce.
 

 

"Clearly, both owner-occupiers and investors are unwilling to part with what may well be the only asset they hold that is actually increasing in value," said Andrew Ellinas of leading estate agents Sandfords.

Until there is a notable rise in the supply of homes coming onto the sales and rental markets, property values will almost certainly continue to increase further, making it even harder for first-time buyers to gain a foot on the housing ladder.

Prime Central London Property Prices Continue to Rise

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.

"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.