Prime central London residential real estate continues to experience high demand, primarily from overseas investors. Cluttons noted many property owners in the capital are keen to hold on to their assets and wait to see what happens when the eurozone crisis is finally resolved. Due to a lack of new supply in the market, the firm predicted house prices in the capital will increase by between two and three per cent by the end of 2012. Conversely, Cluttons expects property values in the rest of the UK to fall by an average of three per cent this year.
Head of research at the organisation Sue Foxley commented: "Strong demand from international buyers seeking a safe haven is creating even more competition for homes and sustaining prices." Nigel Ellis, director at Prickett and Ellis, recently stated that, although the London housing market may be slowing marginally, the sector is broadly stable.
He added the supply and demand dynamics in the central districts of the capital mean there is no limit to how high real estate investment values could rise, as land is restricted and therefore buyers are restricted to existing properties. Ms Foxley agreed that, despite the London residential market remaining "buoyant", it has seen less activity so far this year than was recorded in 2011. However, figures published recently by Knight Frank showed the value of prime property in the city reached an all-time high in June and prices have now exceeded their previous peak - which was recorded in March 2008 - by 13 per cent.
There is a similar story in the central London rental market, with Cluttons predicting annual rental increases of three per cent over the next five years, while acknowledging the pace of growth has fallen back from that experienced in 2011. Strong demand for rental properties is being enhanced by a lack of finance for first-time buyers and the high deposits required by banks, which is unlikely to change in the medium term, the firm added.