Landlords benefit from strong property values
Landlords with property insurance who bought high-end homes as the market fell are benefiting from firming property values.
According to property adviser Savills, prices in prime London have shown much smaller falls in the final quarter of 2010 compared to the rest of the country, while the most centrally located addresses have recorded marginal price growth.
Its quarterly prime central London index is showing falls of just -0.2% in all prime London over the past three months.
This includes all the capital’s top residential locations, bounded by Hampstead and Islington in the North; Richmond and Chiswick in the West; Wimbledon and, Clapham to the south; and Canary Wharf and the Isle of Dogs in the East.
In the most central locations in this area – comprising Mayfair, Belgravia, Knightsbridge, Chelsea, Kensington, Notting Hill, Holland Park, St John’s Wood, Regents Park and Marylebone – average values actually rose very slightly, by 0.4% over the quarter (following a fall of -0.1% in the 3rd quarter).
“The defining characteristic of the prime central London market is its ability to act as an ‘equity funnel’,” said Yolande Barnes, head of research at Savills.
“Not only is it the first port of call for domestically-generated money such as City bonuses but the prime London market attracts large amounts of capital from all over the world.”
Barnes believes that the world’s billionaires buy global real estate in a similar way to gold – as a store of wealth and a hedge against political instability and diminution of wealth in a, perhaps less stable, homeland.
This may help to explain why, even in the prime market, house values are outperforming flats.
In the prime central London area houses saw a quarterly increase of 0.9% compared to prime central London flats, which rose by 0.2%.
There is only a finite supply of houses in the capital and only a minute proportion of new stock is being built as houses.
Savills research shows that once bought by investors and occupiers from overseas, properties are far less likely to return to the market, so it is becoming more difficult for buyers to source stock in the central areas. This rarity factor will underpin values in the core central locations and beyond their boundaries.
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