City bonuses boost London property prices

Published 01st Dec 2009

Prices in the central London housing market have rallied dramatically, but only at the top end

Prime property prices in central London have rallied more than 10 per cent since March, led by the growth in value of £10 million-plus homes, new figures show.

Prices rose 1.2 per cent in November and are now up 11.4 per cent from their trough, though they remain 15.2 per cent below their peak, according to Knight Frank, the estate agent.

It attributed the upturn to growing demand for properties at the very top end of the market as City workers prepare to receive their annual bonuses.

“It is becoming clearer that it is the very top-end of the market that is leading price growth,” said Liam Bailey, head of residential research at Knight Frank.

“Anecdotal evidence from across our offices suggests that City money is becoming more apparent as we get closer to the end-of-year bonus season, and with the upper end of the market benefitting most, it is clear that demand from senior management is driving the market.

“The change in fortunes of the top-end of the market has been dramatic.”

Whereas prices in the overall prime central London market stopped falling in March, it took until May for prices of properties in the £10 million-plus bracket to bottom out.

Since then, they are up by just 6.6 per cent – almost 5 per cent less than the rally in the wider market – with most of that growth (almost 4 per cent) coming in the past two months alone.

“This rise in prices at the top-end of the market has been reflected by significant new activity in the £20 million and £30 million sector,” said Bailey. “Deals at this level were taking place on a monthly basis prior to September. Since then, they have been almost weekly events.”

The weakest growth in November was seen in the sub-£1 million market, where prices ticked up just 0.5 per cent, compared with 1.9 per cent in the £10 million-plus bracket.

Overall, Chelsea, Kensington and Knightsbridge experienced the strongest growth.

With City workers expected to receive bonuses collectively worth £6 billion this year – up 50 per cent on last year’s £4 billion payout – Knight Frank expected demand to continue to stoke prices.

“There is a clear indication that bonus expectations are being felt in the market,” said Bailey. “With stock levels still 25 per cent below trend at the current time – and new buyer registrations up by 30 per cent on last year – the pressure on prices in the short term at least is likely to be upwards.”

Source: ' Times '

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