The Eurozone crisis is driving property prices in central London higher and higher, Knight Frank reported today.
The firm said prime London prices have risen 0.6% this month, contributing to an annual growth of 11.4%. That equates to an incredible increase of £1,117 each day over the past year.
Since the credit crunch low point in March 2009, central London house prices have now risen 37.2%, and are at a record high at 4.5% more than their previous peak in March 2008.
Liam Bailey, head of residential research at Knight Frank, said the impact of European and global financial market turmoil over the past few months has pushed more buyers into the central London market.
On the demand side, the number of new buyers rose by 7% in the last three months, with viewings up by 25%, and the number of offers being made on properties higher by 24%.
Bailey said: “Sharp price rises over the past two years have not discouraged buyers from entering the market. Growth in demand is easily absorbing stock volume increases without downward pressure being placed on prices.
“Last month I pointed to low interest rates and the weak pound as the key issues driving price and demand growth at the current time – with some buyers from Asia-Pacific for example still able to benefit from an effective 25% discount on 2008 prices. In addition it is increasingly clear that the ongoing crisis in the eurozone, as well as wider global market uncertainty, is helping to support the market.
“The role of central London property acting as a safe haven investment in periods of economic turbulence has been confirmed by the fact that the recent growth in purchases has been overwhelmingly driven by international buyers, with domestic buyers now accounting for only 45% of the central London market, compared to 51% 12 months ago.
“As the market has moved into new peak pricing territory, we have been watching very closely to see whether there is evidence of purchaser resistance to these new levels. It appears that buyer concerns over alternative investment opportunities and the potential impact of European and global economic turmoil is trumping any concerns over the sustainability of property prices in London at the current time.”
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Comments
Strangely enough, Winkworths don't agree with Knight Frank's assessment:
http://www.thisislondon.co.uk/standard-business/article-23991578-estate-agents-opt-to-sell-out-as-property-market-stagnates.do
From Brian! Sorry missed it, well said.
"Either property prices have to come down or rents have to go up."
True AC, and since rents are a function of wages (depreciating by circa 3% per annum currently)....
Back to the article, another ramping fluff piece for Knight Frank.
'EA in houses are a great investment shocker'
Hi Brian
Sorry, I was trying to be a bit sarcastic and ironic at the same time - looks like I failed.
I am one of those BTL landlord estate agents that everyone thinks is holding valuations high to protect my investment.
However, I have owned the portfolio since well before this current bubble started and would dearly love to buy some more, but there is no value in it.
Inflation nearly 5%
Rental yields only 5%
Net return on investment = 0%
With the worry that the value of my new investment could drop off a cliff.
The cheapest property "Purchase" that I have is a little one bedroom flat in Stoke Newington that was left over from a pub conversion I did in the mid 90's.
I couldn't sell it then because the market wasn't good enough. I only wanted £40k for it.
It was the profit margin from the deal and "cost" me £9,000 when I bought it off myself.
It has to be worth £250k now and I get £1k per month in rent.
I was cursing my bad luck at the time, but think how lucky I am now.
The interesting thing is the rental yield.
I first rented it out for £450pcm or a 13.5% yield.
Now it is worth(???) £250k and gets £950pcm or 4.56%.
Admittedly you have the relative change in base rates over the time (ignoring current 0.5% which is an anomoly) but even so...
The ROI on property in London is very, very poor.
And consider, however genteel Hackney is supposed to be getting, it is still Hackney.
Either property prices have to come down or rents have to go up.
Or a bit of both.
But the nature of a bubble is that it keeps going until it goes POP!
Anonymous Coward- you need to follow more carefully, there has already been a story on here stating that the Olympics had not pushed prices in the area.
In fact the thought of West Ham moving in has reduced them.
and no one in the indusrty takes anything the NAEA does or says seriously..........................
Meanwhile every where but prime London is suffering. Its a different situation in areas outside Chelsea and Belgravia. The market is dying and prices are starting to fall.
Also we will have the mansion tax coming in with this budget. :)
Just wait until the Olympics are over.
Bong! Bong! Bong!
And the News At 10.
Bong!
We got (fill in your guess) gold medals, blah silver, etc.
Bong!
House prices in Central London collapse overnight to match the rest of the country.
Such & such, head boy of the NAEA said "It was a bubble waiting to burst!"
Bong!
Where are those whingers Wardy and Funboy agent today?
come on lads get out of bed and start commenting.
monday would not be complete without you two smart ar'es