Prime London residential properties fall after a 15-month rally

KUALA LUMPUR: Prime London residential property prices dipped 0.5% in July, ending a 15-month surge since last March, according to the Knight Frank Prime Central London Index July 2010 results released on August 2.

Despite the fall, prices remained 23.4% higher than its lowest point in March 2009, but prices are now 6.1% below its peak in March 2008, the property consultancy said in a statement on Tuesday, August 3.

Knight Frank noted that apart from Mayfair, which registered a slight 0.2% growth, other parts of London have also seen a decline in prices.

The consultancy defined prime areas in London as Mayfair, Hyde Park, Marylebone, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank, which span Westminster Bridge to Tower Bridge or Shad Thames, Canary Wharf, Hampstead, Richmond,  Wandsworth, Wapping and Wimbledon.

The main issue that vendors in the capital have to contend with is the over-ambitious pricing on stock, with the asking prices in some cases at between 5% and 10% higher than buyer expectations.

Knight Frank head of residential research Liam Bailey said the slowdown in the market was expected for several months, with prices rebounding on the back of low interest levels and the weak pound sterling driving prices closer to, or even exceeding, peak levels in some cases.

This is compounded by a lack of homes for sale during late-2009 to early-2010, which served to hike up prices further, he added.

However, he noted that since May, demand had fallen back by 8% while supply had also risen by 7% as vendors sought to benefit from higher prices of homes, adding that from anecdotal observations, price rises have spurred potential buyers to consider renting back again.

“A key indicator of the health of the market is the ratio of asking-to-achieved prices, which hit 97% in May and which is now 95%. Most agents across the capital believe that asking prices are between 5% and 10% higher than where the actual market is at the current time,” said Bailey.

“This month’s price fall is only one piece of evidence, but allied to the decline in asking-to-achieved prices we believe that our forecast for around 5% price growth in central London for the whole of 2010 will be borne out, which suggests that prices will fall by around 3.2% during the final five months of the year,” he added.

He noted that the entry level and very top end of the market were most robust with prices dipping by 0.2% only in the sub-£1 million (RM5.02 million) and £10 million markets, while the weakest markets are the mid-range £3 million to £5 million markets that have seen the greatest surge in prices over the last 15 months.