Prime London Central values continue to surge ahead of the UK

LONDON: Despite the gloomy prognosis on the prospects ahead for the UK residential market, there is a growing acknowledgement that prime London real estate bears little correlation with the rest of the UK. Rather, these are two markets subject to different forces and any idea of a "ripple effect" is outmoded.

According to the latest Land Registry results issued on Friday, Nov 26th 2010 the Royal Borough of Kensington & Chelsea and the City of Westminster, home to London's premier residential addresses, have shown 0.5% and 1.5% growth respectively during October. This means that average values over the 12 months to October 2010 are 13% and 10% higher than the preceding year.

On the other hand, England and Wales showed a drop in average price of 0.8% during October, wiping over £1,500 (RM7,382.98) off the average price of a property since August, representing annual growth of just 3.4% versus October 2009. RICS also report price drops in all 12 of its UK regions along with falling numbers of enquiries, hardly surprising, as the austerity measures, increasing taxes and low mortgage availability force people to sit tight.

Naomi Heaton, CEO of London Central Portfolio Ltd (LCP), comments that "Since the market recovery in spring 2009, only 8% of LCP's clients have been domestic. 92% were non resident and/or non domiciled, attracted by weak sterling, cheap debt and the security of prime 'bricks and mortar' during a time of continued asset volatility. The drivers for London Central are fundamentally different from the rest of the UK. These are two uncorrelated markets with little room for a ripple."

"Base rates being kept so low means the international investor benefits from minimal borrowing costs, combined with the consistent rental yields and capital growth offered by prime London Central. The weakness of sterling has also encouraged global investors to make opportunistic acquisitions helping to stimulate the market," says Hugh Best, head of investment management at LCP.

LCP managing director George Hankinson adds: "The reduction in enquiries from the eurozone due to a weakening euro has been more than offset by Australians capitalising on a strengthening Australian dollar and Malaysians with the stronger ringgit. With the mainland Chinese looking to invest outside of their borders and seeing London as a cultural and educational hub, the supply/demand imbalance will continue to underpin prime London Central real estate. The fundamentals for the rest of the UK do not look so rosy."