Super-Prime London Prices Shoot Upwards

The price of houses at the very top of the London property market achieved record growth in June. Research by estate agent Knight Frank shows record growth of 3.1%, which is the fastest growth in a month since the agency began its records in 1976. It also found that the annual rate for the same market was 34.5% in June, which is the largest figure for a years seen since 1979.

Those properties seeing the largest rises were between £1m and £2m, and those valued at over £4 million. House prices in the latter bracket have gone up by an amazing 43% in the last twelve months. The areas where house prices have gone up the most are SW3 and SW10, with a 40% rise on houses valued at over a million in the last year. Properties over a million pounds represent 7% of the London property market.

It looks as though prime London is having an almost unstoppable surge in house price inflation, but deeper research actually shows that the highest growth is at the very top end of the market – super-prime London. For example, the growth of properties valued at just below a million in the same areas had slowed down, no doubt under influence from recent interest rate rises and other economic factors putting the squeeze on homebuyers. A slowdown for super-prime London house prices would probably mean that there was a huge economic problem on a global scale as many buyers are foreigners.

Further out of central London, areas like Hampstead, Wapping and Wimbledon have seen growth of 11.4% in the first six months of 2007, giving annual growth of 21.8%. These don’t match up to super-prime increases, but still show superior growth to the broader London house market.

Knight Frank’s assessment is that the normal house market slowdown in the summer will be cooled even further by other economic factors, but super-prime central London will still have annual growth of around 25% come December.

Meanwhile it has been calculated that the cost of an extra bedroom in a large property in London is £161,221. That figure is £20,000 higher than the cost of an average home in Scotland. The figure is worked out from the average price of a three-bedroom property in the capital as £396,387, and the average price of a four-bedroom home is £557,608.

It is such a difference that forecasts are that London homeowners will look for more ways to improve or increase the size of their existing property such as an extension or loft conversion, rather than seek to move.

The difference between and one-bedroom property and a two-bedroom property is much less, at an average of £89,751. In London there are currently around 13,600 two-bedroom properties up for sale, but less than 6,000 one-bedroom properties. Such as shortgage of smaller properties is a concern for first-time buyers as that key difference in price for an extra bedroom would evidently be a showstopper for many new buyers. It is unlikely that this situation will ease with London market continuing to push upwards.

Tom Smith
26th July 2007

Tags: inflation, prime, Mortgages, foreigners, london