Home » London Focus » Good growth expected in London property market

Good growth expected in London property market

"The London sales market experienced good growth in 2010 with properties in creasing in value by an average of 11.5%, slowing towards the end of the year with sales volumes down 42% year on year.

"This is perhaps not surprising in the wake of the coalition government’s autumn budget, expenditure cuts and tax increases. London vendors and buyers seem to have adopted a ‘wait and see’ policy with the number of applicants also down by nearly 8% year on year from a fairly low base.

"This is likely to carry through into the first few months of 2011; but at the very top end, the spectre of the stamp duty increase in April may stimulate demand. At all levels of the market there will be sensitivity to the prospect of interest rate increases, so we expect a number of buyers to ‘jump in’ before rises take effect.

"The key component will be the amount of stock – unless this increases, we might all be surprised by the level of price increases. We predict an increase of 5% in 2011, but this may prove to be conservative."

"With sales volumes in 2010 down by 42% year on year, activity transferred into the lettings market where the number of lets was up by approximately 7%. Interestingly, the number of applicants was down by 8%.

"This resulted in average rental prices increasing by approximately 16%, slowing in the second half of the year caused by a severe shortage of stock – 20% lower than it was a year ago.

"As there will be no dramatic increase in the availability of mortgage finance, demand at the lower end will push rental levels up. Provided that the government does not indulge in gratuitous ‘banker bashing’, a return of activity and growth in the City should produce good demand at the upper levels. In our view, rents are set to increase by another 10% in 2011."

Have your say on this story using the comment section below.