Prime regional properties are offering increasing value for money.
"The key to the current disparity between London and the regions is whether equity is flowing out of London or not," Barnes said.
"Prospects for future recovery of the regional prime property markets will depend on either the strength of local economies and wealth generated from them or the extent to which incomers are bringing London equity with them – or a combination of both.
"The speed of price growth in prime central London has been surprising, bringing forward growth expected for 2012. As a result we have revised our forecast for 2011 up from -1.0% to +8.0%, while prime regional values are now expected to fall by -3.0% across the year, compared to an original forecast of -0.1%."
Savills quarterly prime market indices – key findings:
* Prime central London, London’s "global" market has seen growth of 6.3% in the first six months of this year, taking annual growth to 9.6% for houses;
* Prime south west London, where domestic buyers dominate, has risen by 3.5% year to date and 4.8% in the past year;
* Average prime regional values have fallen by -0.7% year to date and -1.8% in the past year;
* Prime second homes markets of South West remain -24% from peak
Barnes said: "Forecasting the short term, particularly for prime central London, is risky and volatility cannot be discounted. On the upside, global turmoil should continue to drive inward investment, while contagion from the crisis in Greece could have a real downside risk. Notwithstanding short-term volatility, the average five-year forecast remains bullish and unchanged at 33.4%. The ‘priming of London’ is expected to continue as domestic wealth is increasingly displaced from central locations thus gentrifying new locations and underpinning price growth.
"The big question is when the ripple will kick in regionally, with just the earliest signs of this happening on the outskirts of London.
"The elastic linking the London and regional markets is being stretched but it will only stretch so far. Sooner or later a tipping point will be reached as buyers respond to the regions looking increasingly good value compared to London," said Barnes.
"As such our five year regional forecast remains unchanged, but for now, the more divorced a market is from the global equity that is driving prime central London, the weaker its performance both in terms of value and turnover."
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