Property values continue to spiral downwards across prime London, with sectors of the market most reliant on financial and business services suffering most acutely, says a new study.
Areas hardest hit include Kensington, Holland Park and Notting Hill with a further 5.2% fall, knocking values down 19.4% over the past year.
Sixty percent of purchasers come from the financial and business sectors, along with 62% of tenants.
In south west London (Barnes, Putney, Fulham, Wandsworth and Richmond) favoured by City employees for family housing, demand also has decreased. An 8.6% fall over the quarter means values are down 16% on the year. Rents fell by 5.8%, heavier discounts in some areas.
Capital values in central London are expected to fall by 30% from their peak in 2007 before recovering in the middle of 2010, according to a new report from Savills (www.savills.co.uk).
Further City job cuts this year and in 2009 mean rental values in central London could fall by 7% from their peak.
On the plus side, where occupiers are more diverse and wealth more established (Knightsbridge, Mayfair, Chelsea and Belgravia), values have fallen by just 7.6% over the past year, with only marginal rent drops over the third quarter.
‘Recovery, when it comes, is likely to be driven by higher yields, attracting investors alongside stable rents and the capacity for rentals growth,’ the report explains.
In prime regional country markets, the pace of price falls is accelerating, with falls in all price brackets recorded during the third quarter.
Yolande Barnes, director of residential research at Savills, says that the prime markets will continue to be hard hit next year, as the repercussions of the credit crunch rumble on: ‘But the diverse wealth and high levels of equity vested in them means prospects for an upturn are greater than in mainstream markets, and we therefore expect earlier recovery.’
Charlie Ellingworth from search agents Property Vision (www.propertyvision.com) also believes that areas like Chelsea, Kensington and Notting Hill will be hard hit.
‘These areas were kick-started by City bonuses in 2005 and the boom years were City driven. What the trigger will be to motivate buyers is yet to be seen,’ he says.
Another new trend witnessed by Property Vision is how more transactions took place over the last month as agents and sellers become more realistic on pricing property.
On the rentals front, Peter Mackie from Property Vision warns that property repossessions pose a serious threat to tenants. ‘We have to carry out a great deal of initial work to ensure there are no problems,’ he said.
Property Vision also reassures buyers there are no ‘bad’ deals out there and people are realising leaving money in the bank does not net much profit.
‘They will realise there are opportunities to make money and should take some risks again to make some capital gain,’ adds Mr Mackie.