Property in prime central London weakens further

Prices for housing in prime central London housing market remained unchanged in April with a barely discernable growth rate of 0.1%, according to Knight Frank.

In April only properties priced between £2.5m and £5m and those over £10m grew in value (0.3% and more than 1% respectively).

The overarching trend over the last three months is one of continuing slowdown, with a modest inflation rate of 0.8%; the lowest rate of growth since February 2005.

Over the last 12 months prime property prices have risen by 17.3%, less than half the rate seen at the height of the market in August last year and the weakest rate of annual growth since May 2006.

The ratio of achieved price to asking price has fallen markedly over the last 12 months with an average of 96% of original sale price being achieved in April, in April 2007 the figure was 102%.

Liam Bailey, Head of Residential Research at Knight Frank comments: “The Knight Frank ‘Prime Central London’ index for April provides further evidence of the weakening state of the flagship UK property market with poor growth across the board.

“Even though property in this elite category is now worth 17.3% more than a year ago this disguises the fact that we are now in the grip of a major housing market slowdown; in August last year home owners in this category were seeing growth at an annual rate of around 38%.

“In truth while there is some movement in the market and sellers are continuing to find buyers, April’s monthly rate of growth only mirrors that seen in March at a near par 0.1%. Disappointingly for those in the prime, rather than the super-prime market, growth this month was concentrated in the £10m + market, where some properties have seen almost 5% growth in prices since the turn of the year. The super prime market has become pretty much the only bright spot in the UK over the course of the last six months.

“Vendors are becoming more attuned to the more difficult market sentiment, although there is still some over ambitious pricing in the market. A year ago average achieved prices hit 102% of asking price, since then the relationship has reversed, with achieved prices only averaging 96% of asking prices – the lowest ratio seen since mid 2004.

“This is given added emphasis by statistics which show a rise in the number of days a typical property in this category stays on the market from launch to sale. While 12 months ago vendors could expect to see their property move through the market in just over a month (47 days), now the sale board has to stay up for around two and a half months (76 days).

“Although there is little expectation of a further cut in the base rate this week, the truth is that even if there were the effect would be limited. The real impact will only come once the Bank of England’s ‘Special Liquidity Scheme’ has worked its way through the money markets and lenders feel confident lending to each other again.”