Property values in prime locations in London are expected to rise further over the coming years. This is according to the latest Knight Frank UK housing forecast, which estimated that residential real estate in the capital's most sought-after districts will climb in value by five per cent in 2012. By 2016, the firm predicts that price growth in central London will reach 24 per cent. However, this is in contrast to the rest of the country, with values expected to decline by five per cent next year.
Grainne Gilmore, head of UK residential research at Knight Frank, explained that the low base rate of interest - which currently stands at 0.5 per cent and has done since March 2009 - has prevented house prices falling significantly. She stressed that this correction is still to come, stating: "Next year, amid a 'perfect storm' of a struggling economy, public sector cuts and rising unemployment, prices will fall." Ms Gilmore added that any rises to the UK's interest rates are likely to suppress growth until 2015.