London cools off

Prime central London property fell by 5.5% in the second quarter of 2008 says new research from Savills. This follows on from two quarters of less severe falls, bringing the total fall since the peak at the summer of 2007 to 9%.

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Although prime central London as a whole is falling, the very top end of the market is showing signs of slowing, but not declining. Values in the £5m+ bracket have flattened, while the £10m+ bracket recorded a further 1.2% increase in values in the second quarter of 2008. This is supported by the scarcity of product which continues to be outstripped by demand.

The research suggests that these figures are the first evidence of a pattern which will see a ‘sharp shock’ in the prime London market, as the balance shifts further in favour of supply over demand. This will, however, be followed by a rapid recovery in values, well ahead of the mainstream when the turnaround comes.

‘Analysis of previous trends infers that history is, in part at least, beginning to repeat itself, with the more volatile prime London markets falling more sharply than the mainstream,’ said Yolanda Barnes, Director of Savills Research. ‘This sector of the market is coming out of an extraordinary period of growth and a price correction should come as no surprise, particularly given the prevailing economic circumstances.’

‘Whilst we expect to see further falls in 2008, leaving values down 15% year-on-year by the end of the year, and acknowledge the prospect of further falls in 2009, we do expect the prime central London market to be one of the first to recover, and to recover rapidly, potentially turning into growth in 2010.’

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