|The London Prime market has been a slow but steady performer over the past few years, even managing to hold its own through the dark days of the recession. And as we move towards Q2 of 2015, other compounding factors could have a positive influence on the progression of the market, despite the momentary blip in the figures that a General Election in May might cause.
|Demand continues to outstrip supply|
|One of the biggest factors that may firm up a currently reasonably soft Prime market and the London stock in general is that demand continues to outstrip supply. This is in part due to the slow-down in building throughout the recession and that the building industry is still effectively playing ‘catch-up’ in bolstering the housing stock overall. Despite prices being soft, stock is disproportionally tight, and overall in February the housing market saw prices rise by £5,000 per property (an increase of around 2.1% overall).
But in the London Prime Market figures have fluctuated, with some boroughs performing better than others. Throughout the last 12 months investments in London Prime property in highly desirable areas such as the West End, Kensington, Fulham, parts of East London and Islington, has moved in the right direction, albeit at a very sedate speed. In February 2015, for example, Prime moves were 0.2% up, which matched the previous month’s levels and took the annual increase to a fairly respectable 4%.
This may not be a figure that’s going to send returns soaring on investments. But nevertheless it does represent a steady and (most importantly) sustainable increase in the value of London Prime in general. And that in turn translates into to a steady and sustainable rise in portfolio values.
|The Buy-to-Let factor|
|One thing that has had a real impact on the availability of housing stock both in the general market and in the London Prime market in particular has been the reluctance of landlords to release property onto the market. Currently, buy-to-let in central London represents a steady (if not stellar) return. With the average length of sales for London properties taking around 70 days last month, landlords may be more inclined to hold on to Prime rentals rather than have a two-month return deficit by evicting tenants and putting the property on the market. This is the highest ‘time to sell’ statistic in the last year, and could be an indicator that the market, despite a more positive economic outlook, remains soft and could continue to be so for some time yet. Put simply, buyers are taking longer to make a decision, especially with a limited stock to choose from.|
|Over the next few months there are a few variables that could influence the Prime market, not least of which is the general election in May.
What could have more of an impact, particularly on the Prime market, is if the ‘mansion tax’ makes it onto the statute books after the election campaign has finished. Prime properties of more than £2million could be impacted hardest, as it’s always those that are on the cusp of inclusion into a tax band that feel the greatest impact. Prime property with a value of £5million will also feel the impact of a mansion tax, but perhaps not as proportionally dramatic as those at the lower end of the Prime scale.
|The ‘hot zones’|
|While the usual suspects of Kensington and Chelsea, Fulham, E14 and the trendy East London region of Hackney and Shoreditch are showing good performance figures so far this year, the big ‘hot zone to’ look out for in 2015, according to London Prime estate agents and property management experts, is St John’s Wood and Marylebone. Leafy enough to attract wealthy families but close enough to the business centre of the capital to draw in rich professionals too, these areas are showing a marked increase in Prime prices, particularly in the £2million to £3million range. Closer to the West End it’s the £5million+ properties of Belgravia, Chelsea and Kensington that are attracting foreign investors.|
|Stock in Trade|
|The Prime market has been heavily influenced by the overall health of the Stock market, and currently mid-term predictions are that this could have a steadying influence on the market over the next few months. The performance of the prime central London rental index has broadly tracked global stock markets in recent years. Currently, the trend for the FTSE100 and other international markets is upwards (although at a steadier rate than in previous ‘bounce backs’ after recession). This indicates that a corresponding upward trend will continue in the Prime property and rental market in London, although perhaps also at a slightly more sedate rate than in previous years. The influence of other outside factors, such as the continuing Eurozone issues offset by the strength of the US economy, may also play a part in dictating the path of Prime values in the next 12-18 months.|
|The Prime rental market|
|It’s not only the real estate market that’s keeping Prime prices in London in the black, but the rental market too. Currently, letting agents in Canary Wharf are seeing an increase in interest in lettings in and around E14, as the UK’s buoyant economy encourages even more high-finance businesses to set up operations in London. Relocating staff has put added pressure on to the lettings market, driving rental prices up. The only two that are perhaps bucking the trend a little are Mayfair, which has seen a small 1.6% dip, and the ultra-trendy Islington, which has softened by 1.2%. The prime rental zones mirror those of the purchase market, with Marylebone, St John’s Wood and the city fringes showing consistently high demand and corresponding rises in rental prices.|
|All figures and quotes are accurate at the time of publishing|