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Prime London house prices to grow by 7%

Thursday, 15 December 2005 12:00 AM

House prices at the top end of the London market are due to grow by seven per cent in 2006, according to a leading estate agent.

Knight Frank forecasts that shortages of quality prime stock - penthouses with an average value of over £1.5 million and houses with an average value of close to £3 million - along with increased foreign purchases and city workers receiving their bonuses will contribute to this growth rate.

The prediction follows two months in which the prices of prime central London property have rapidly increased.

Knight Frank's prime central London property index shows that house prices increased by 1.3 per cent in November, following a 1.1 per cent rise in October.

This was largely due to there being fewer properties on the market, with many people waiting until the new year to put their property up for sale.

Overall in 2006, the estate agents predicts that the mainstream property market will see house prices grow by 2.5 per cent, while in London they will grow by five per cent.

But the prime central London market is expected to perform the best with anticipated growth of seven per cent.

Noel Flint, a partner in Knight Frank's Sloane Avenue office said: "Although there has been a slight slowdown in the growth of applicant numbers in the weeks leading up to Christmas, there are however a number of very determined buyers who want to find something by Christmas time.

"This has led to several competitive bidding situations this month. The level of demand has remained high due to a shrinking pool of properties available. The prospect of bonus buyers has also fired up non-bonus buyers who do not want to be pushed out of the bidding."

The prime central London market has witnessed a shifting pattern of overseas buyers as the year has progressed.

Knight Frank's data shows that the second and third quarters of the year have seen a marked increase in the number of buyers from Asia.

With the economic power of Asia continuing to grow, Knight Frank expects the number of buyers from China and Japan, among others, to continue.

Liam Bailey, head of residential research with Knight Frank, said: "The reason why the prime London market is robust is because it is the capital of Europe. It is the centre of the European financial/art/media and legal markets - so as a European base London is the logical location.

"London is perceived as a safe environment in which to place investment capital, the UK has a favourable tax regime for non-UK residents and the residential market is mature and transparent. The range of business and international links in London is so great that London is not seriously challenged by other locations in Europe."

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