London property market bucks trend

Published on: 16/01/2008

The increase follows two successive falls in prices in the capital during October and November and comes amid speculation the market could experience a severe correction during 2008.

However, according to estate agents Knight Frank, the market is robust and grew by 1.4 per cent during the final quarter of 2007.

This is just 0.2 per cent slower than the previous quarter.

Although the annual growth rate in the market slowed to 28.6 per cent, this is only two per cent lower than Januarys year on year rate and almost identical to the figure recorded in December 2006 (28.7 per cent) – which at that stage was the highest since June 1979.

Knight Frank attributes the increase in prices to the Bank of England’s reduction in the base rate of interest during December while suggesting a further cut could boost the market again as well as the influx of City bonuses.

However, it is estimated bonus payments to financial workers in the City fell by between 25 and 50 per cent this year, and consequently the effects on the market were less pronounced.

While prices were also buoyed by the high quality of property on the market, concerns remain over the longer-term picture.

“It would be unwise to suggest that Londons prime market has weathered the credit crunch on the back of these figures,” said Knight Frank in a statement.

“Indeed most indicators suggest tightening economic conditions will continue and this may well result in job losses across the city. If this is the case it will inevitably lead to property purchase becoming a discretionary as opposed to investment making process.”

Across prime central London – Knightsbridge, Mayfair, Belgravia and Chelsea property prices returned to rates of growth last seen in September 2007, with increases of 1.8 per cent.

In response to the figures Knight Frank maintains its prediction prices will increase by three per cent in the prime central London market in 2008.


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