Prime central London property prices excelled in 2006 according to new figures from Savills. Values rose by 23.9% in 2006 compared to 4.4% in 2005 – the highest annual growth rate since 1999. The demand for properties is still far outpacing supply, driving up prices with prime central West London (Kensington, Holland Park and Notting Hill) recording the highest increases. In the UK as a whole Savills noted residential values growing by 9.3% compared to 11.3% in Greater London.
The top end of the market in prime central London started to pull away from other price brackets in the final quarter of 2006, according to the report. Strong demand for exclusive properties was fuelled by the anticipation of large bonus payouts. ‘The prime housing markets are closely correlated to the performance of the financial markets,’ explained Harriet Black from Savills Research. ‘In fact we estimate that around £5.5bn (before tax) of 2006’s bonus pool will make its way into the property market in some way’.
An ever-increasing number of cash rich investors from all over the world are also driving up prices. ‘International buyers dominate the top end of the market, accounting for 70% of Savills sales over £4m,’ said Ms Black.
Savills expects these trends to continue into 2007, with property values in prime central London increasing by 15% – the best performing part of the UK for the second year running. ‘The outlook for the financial markets and global economy continues to look bright. Unlike last year, when fears over global imbalances, energy costs and rising inflation made most commentators sound a note of caution, most are pretty bullish for 2007,’ said Ms Black. ‘It is not just the UK economy which is performing well. The increase in global wealth is having an impact on prime central London as high net worth individuals from around the world look for properties in the UK.’