Demand for listing under £1 million in London likely to remain strong

Demand for London listing priced below £2 million is set to remain strong, with the city’s population forecast to grow by more than 100,000 every year for the next decade.

As house prices grow across London, it will create new markets where listings cross the £1 million threshold, according to the latest analysis report from real estate firm Knight Frank.

Data from the report shows that annual growth in London’s prime market fell to 1.7% in August as changes to stamp duty dampened demand and the number of £1 million plus sales were down by 21% in the year to April 2015.

It also shows that annual price growth in prime outer London fell to 3% in August and annual rental value growth decreased to 2.5% in prime central London and 1.2% in prime outer London due to jitters over China and high stock levels.

However, there are new areas coming into the prime market. The report explains that new £1 million London neighbourhoods include Hammersmith, Maida Vale, Queen’s Park, Muswell Hill and Vauxhall.

The analysis, based on postcode districts where at least 20% of sales have been above £1 million in at least one quarter since the start of 2014, shows that these areas have seen a transformation.

Hammersmith (W6) had five such quarters since 2014, making it the area that has undergone the biggest transformation in terms of £1 million plus sales. Other areas include Maida Vale (W9), Queen’s Park (NW6), East Finchley (N2) and Muswell Hill (N10). Further south, Battersea (SW11) and Vauxhall (SW8) which have consolidated their positions as £1 million markets.

‘Though it has been an unsettled 12 months, the sub£2 million market has been more immune to recent political and economic events, particularly as this price bracket sat beneath the threshold for the proposed mansion tax,’ said Tom Bill, head of London residential research at Knight Frank.

‘This market is more closely linked to domestic UK demand and the health of the country’s economy and it is easy to forget the fact the recovery has been stronger than many predicted, underlined by strong GDP data in July,’ he pointed out.

‘In a further recent sign of the improving outlook, cash bonuses in the 2014/2015 financial year were up 2.7% on the previous year and just 0.1% below their record level in 2007/2008. The result is that price growth below £1 million and between £1 million and £2 million has been stronger than the average in prime central London and prime outer London,’ he added.

The analysis shows that listings below £1 million grew 17.5% in prime central London and 21.3% in prime outer London in the two years to August 2015, compared to the respective averages of 9.5% and 15.1%. Between £1 million and £2 million, prices grew 15.7% in prime central London and 18.5% in prime outer London over the same period.

Demand has also held up better for sub £2 million listings since December’s increase in stamp duty. There were 3.6% more viewings in the sub £2 million level in prime London between January and July this year compared to 2014 while there were 10% less at above £2 million.

‘Demand for London listing at below £2 million is set to remain strong, with the city’s population forecast to grow by more than 100,000 every year for the next decade. As house prices grow across London, it will create new markets where listings cross the £1 million threshold,’ said Bill.

‘The strength of the UK’s economic recovery means demand is poised to pick up in September, a theory reinforced by the recent performance of markets more closely aligned to the UK economy. For the above reasons, price growth in prime London will be steady rather than heady in the coming months,’ he concluded.

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Source: Property News Spain