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Knight Frank: Prime central London prices up 0.1%

Tuesday, 1 April 2008 4:03 PM

Growth in prime central London residential market slowed further during March, with prices rising only 0.1 per cent over the month according to Knight Frank.

This represents a slowdown from the 0.6 per cent growth recorded in February, and marks a continuation of the trend "of steady decline in growth" according to the estate agent.

As a consequence annual price growth in the prime markets of the capital has slowed to 20.4 per cent - the lowest level since March 2006 and down from a peak of 37.9 per cent in August 2007.

"The explanation for this pattern of weakening growth is to be found in the continuing pressure being felt in the international money markets; a problem compounded by problems at various financial institutions on both sides of the Atlantic in recent weeks," said Liam Bailey, head of residential research at Knight Frank.

"However, it also reflects growing fears for job security in the City."

Knight Frank points to a recent prediction from the Confederation of British Industry (CBI) - that 10,000 jobs in the financial services industry could be lost in the next three months - as a cause for concern.

This sector has historic been a key driver for the prime central London housing market.

Yet, a government u-turn on its non-domicile tax policy could have averted a more severe slowdown argues Knight Frank.

"This time last month we were anticipating the Budget and the chancellor's statement on changes to the rules governing non-dom taxation," continued Mr Bailey.

"Following considerable lobbying a greatly modified set of proposals were presented on March 12th - which has done much to ease fears of the mass sell-up by those from this in this sector."

It may now be down to the Bank of England to take decisive action in order to avert a wider slowdown, argues the estate agent.

"News of a change in base rates next week will be more eagerly anticipated than usual, especially after minutes from the last monetary policy committee (MPC) meeting revealed a softening stance on interest rates, even though they remained unchanged," explained Mr Bailey.

"Since then events, not least comments by the governor of the Bank of England last week, offer hope that a cut in interests rates may be on the cards."

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