Following the expected ‘Olympic lull’ in the market in early summer, the post-Games rebound has seen London’s capital and rental values rise, according to the Cluttons Residential Investment Monitor Q3 2012.
Average house prices across the capital grew by 3.1 per cent during Q3, after a more modest rise of 0.9 per cent in Q2. This healthy growth leaves average property values in prime Central London 3.33 per cent above the Q3 2007 market peak and 7.1 per cent higher than this time last year.
Cluttons also reports a surge in London’s rental values with a Q3 growth of 1.5 per cent following three quarters of negative growth. This leaves annualised rental growth unchanged compared to Q3 2011.
International private investment trends in the capital showcased a distinct geographical divide: investors from India, Western Europe, Russia and other Eastern Europe countries are increasing their focus on low yielding prime core assets, while investors from the Asia Pacific region have remained primarily interested in the new build offering of central south east London, which includes east London sub-markets and key areas south of the Thames, where gross yields are higher.
The common denominator for private investment remains the generally shared focused on long-term performance, with Russian and other Eastern European investors being equipped with the highest budgets of £5 to 20 million, closely followed by Western European investors with budgets varying from £2 to 15 million.
Domestic lending remains restricted for both development funding and investment, with overseas banks becoming more and more of a financial alternative, with a clear upturn in lending by key players like Barclays Singapore and Bank of China.
Sue Foxley, head of research, Cluttons, commented: “Despite the promising growth in rental values this quarter, we expect average rents in prime Central London to end the year marginally negative, or flat at best. This is due to a market readjustment following the unusual and unsustainable pace of growth recorded in 2011. However, as demand is still outpacing available properties, we are expecting a slight adjustment rather than a significant decrease.”
“Central north west London was the best performing London region during Q3 2012, with an outstanding upturn of 7.5 per cent in capital values being recorded. Calculated yields in Maida Vale and St. John’s Wood are consistently high, reaching 6.38 per cent and 6.36 per cent respectively.”
