Credit crunch takes its toll on prime London property

Prime central London property values succumbed to the pressures of the global credit crisis and subsequent market volatility during the final quarter of 2007 and fell slightly, according to Savills Research. A fall of 2% was recorded during the three months to the end of December to leave annual growth running at 16.3%.

Lucian Cook Director Savills Research comments: “This small fall comes as no surprise. We anticipated a fall of 3% in the final quarter of the year, in expectation that the market would react in a similar manner to previous financial shocks and reduced bonus expectations amongst City buyers would bite.”

In reality, the falls in prices have been slightly lower than expected and have generally been confined to that sub-£2m market where City bonus money is a key driver. As a result, while we forecast annual growth for the year of 15%, this has been marginally exceeded.

The top end of the market continued to show the most resilience. While annual growth in the £5m plus bracket has reduced substantially, this is largely because figures at the end of the third quarter took into account the exceptional increases in values which occurred between September 2006 and March 2007. In the last quarter, values in the £5m plus bracket increased by 2.5%, reflecting continued demand from non-doms and UK buyers with significant accumulated wealth.

Prime property in South West London (Fulham, Barnes, Putney, Wandsworth and Richmond) also proved to be resilient. Average values in this area increased by 0.6% following continued demand for good quality family housing. Looking forward we expect growth of 5% in 2008.