Rich Londoners are fuelling record breaking price rises in the city’s prime property market, according to Knight Frank’s Central London Prime Property Index…

Upmarket residential property in Central London has achieved a record breaking 34.5% price growth in the last 12 months, the highest rate since 1979. In June alone, prime property prices rose 3.1%, the highest monthly rate of growth since the start of our index in 1976. 

The market is being led by price growth in the £1-2 million bracket and property priced over £4 million – where price growth is now recorded at above 43%

Houses have outperformed flats in terms of price growth in each month since January this year.

SW3 and SW10 have replaced SW1 as the centre of the most significant price growth with prices above £1 million growing by more than 40% in the last 12 months.

Central London ‘steaming ahead’

Liam Bailey, Head of Residential Research, comments: ”On the surface, it appears that the prime central London market is steaming ahead with growth of 3.1% in June, however a more detailed analysis reveals that much of this growth is concentrated in the very upper ends of the market”

”Properties priced above £4m experienced growth of 43% in the 12 months to June while prime properties priced under £1 million grew by only 1.6%. Over the past three months price growth in the sub £1 million price category has eased possibly reflecting the recent interest rate rise and the sensitivity of this part of the market to general economic trends.

”At the other end of the spectrum London’s continuing ability to attract wealthy people from around the world has detached the super-prime market from the wider marketplace. A slow down at the upper end of the prime market in our view will require a significant economic shock affecting both the London and global economy or government intervention in the form of taxation or changes to the status of non-domicile residents.

”Key market indicators together with the traditional seasonal slow down suggests that price growth in prime central London is likely to slow. In June alone, the number of applicants to the number of properties available has fallen by 5.5%, implying an improvement in relative supply. We expect to see price growth in prime central London settle at 25% by the year end”.

Growth will filter down

Steve Lavers, Director of Linden London Developments commented: “This growth at the top end will filter down to the middle market, where properties in the £500,000 -£1,500,000 bracket will see a rise in demand, as buyers are priced out of the most desirable homes in the prime central London locations.

“The London market exists in a bubble with unprecedented price growth driven by its unrivalled status as the most desirable city to own property in the world. Demand from international buyers at the top end of the market remains very strong and this buyer group is virtually unaffected by interest rate rises, resulting in the London market surging upwards as property price growth elsewhere in the UK begins to slow.”