London’s prime residential markets sustain performance

KUALA LUMPUR: London’s prime residential markets – Central, South-West and East – are keeping their heads above the water amidst economic and political challenges.

Central London, with its stock shortages and continued overseas demand, thanks to the weaker sterling, will protect prices in the short term and drive market-leading growth in 2011 and beyond, said Yolande Barnes, Director of Research with Savills in a May 2010 Savills Research Residential Property Focus.

“Within Prime Central London, transaction levels over the past year have been running at approximately 80% of their 2006-07 peak, having fallen to just 25% in 1Q2009,” said Barnes, a director at Savills. “A higher-than-normal proportion of this demand (55%) has come from overseas buyers in the past year. This compares with 45% at the peak of the market,” she added.

For South-West London, which caters to the domestic family buyer, the outlook for this segment is not so good. “This market is more exposed to higher levels of income tax, fewer bonuses and the threat of higher stamp duty,” Barnes said. “Consequently, we expect it to suffer more than Central London in the next two years but rebound more strongly afterwards.”

The last prime sector is East London, which will likely be highly dependent on the position of London as a world financial centre, said Barnes. This area includes Docklands and Canary Wharf, which Barnes describes as a “less mature, development-led” market.

“Compared to the other prime London markets, Docklands and Canary Wharf have been slower to recover, both in terms of transactions and price growth,” she said. However, the return of investors, both domestic and overseas, and second homeowners have resulted in the strongest price growth of 3.3% in 1Q2010 for this sector.