Financial cuts cause for concern for prime London property

Following a recent survey, the British Chambers of Commerce (BCC) has warned that the number of people without jobs was expected to increase by between 300,000 and 350,000 over the next 12-24 months, taking the total number of unemployed to over two million. A wide-spread loss of jobs is already impacting on property prices and latest figures from Primelocation.com, the UK’s leading search portal for prime properties, show that top-end properties in London are far from immune from the negative effects of the credit crunch.

The Primelocation figures show that in September, prime London sales values dropped nearly 1.8% - making it the fourth consecutive month of falls and meaning that prices have dropped by over 7% since June. Rental values are on a similar downward trend, dropping by 1.16% since August and following five months of consecutive falls. This general fall in prices has been attributed to the increased amount of stock on the market – currently 32% higher than this time last year.

The sales figures show that only central London saw a positive change in average prices, with Pimlico up 8.6% and South Kensington and Knightsbridge up 3.9%. West/South West London showed the largest average decline down 2.7% with Barnes faring the worst with a fall of 3.4% and Wimbledon down 2.9%. North West London is also down 2.6%. In this area, Highgate saw the largest decline with an 8.8% fall and Maida Vale fell by 5.5%.

For lettings, only the Central and South West areas of London have seen positive growth with Kentish Town and Bloomsbury, Clerkenwell and City performing especially well and enjoying increased of 4% and 4.6% respectively. West London rents were hardest hit, falling 2.51% as stock continues to flow onto the prime London rental market.

Andrew Smith, Primelocation.com’s Head of Insight comments: “The current turmoil in the market is affecting all property owners, including those in prime London locations and, unlike the mainstream market where stock is falling to record lows, we have seen an increasing amount of prime stock come onto the market for both sales and lettings in the past few months. The increase in stock for sale has been caused by wealthy investors offloading stock as well as home owners who have been forced to re-evaluating their finances following steep rises in mortgage rates.”

In London, there has already been a number of widely reported job cuts from companies struggling to cope with the turmoil in the financial markets including Lehman Brothers, Merrill Lynch, Citigroup and HSBC. These job losses are expected to have an especially severe impact on the corporate rental market, which had been one of the few property sectors performing well this year. Rental agents Savills say 64 per cent of its corporate tenants in London work in the financial services industry, a proportion mirrored in most top-end lettings agencies. Large-scale job losses will result in the termination of tenancies on hundreds of top-end apartments and houses in many prime London areas.

Andrew continues, “Many would-be vendors who have been unable to sell their property for the desired price are deciding to let it out. This comes at a time when many of the people who would have previously snapped this type of property up, namely high earners working in the financial sector, are facing their own uncertainties. At the prime end of the rental market, the combination of increased stock levels and fewer companies able or willing to spend money on expensive corporate lets is likely to mean that landlords will be faced with the choice of either accepting a lower rent or suffering longer void periods. We expect this trend to continue until the financial markets find some stability.”

For further information, visit primelocation.com