Commercial Insurance Articles
High-end property outperforming overall housing market
22 Apr 2010
Despite the well-documented downturn in the housing market, it seems that not all property owners are licking their wounds and praying for a fast recovery.
Those operating at the top end of the market have reported relative success over the last year, insisting that sales have remained stable.
Mouseprice.com's Annual Street Rankings report for 2010 found that the most expensive street in England and Wales - Chester Square in London - has continued to experience extremely high sales prices in the past year.
The average value of a property in this coveted location, SW1W, is £6,596,000, up from 2008's £6,296,000 figure. The most recently sold home in Chester Square went for £7 million, according to Mouseprice.com. And in 2008, there were four mega-sales where properties were sold for between £12.2 and £19.7 million.
Furthermore, Primelocation.com's house price index found that the average cost of a high-end property (comprising the top 25 per cent of all UK homes by value) was £449,095 in February, 3.7 per cent higher than the same month last year. However, this was down by 0.3 per cent on January prices.
Prime platinum property, which refers to the top ten per cent of all UK homes by value, cost on average £618,706 in February, up by almost 0.1 per cent on January. Annual growth stood at six per cent.
Overall house prices have experienced a fall of 0.3 per cent in the year leading up to February 2010 in contrast to prime values, indicating that the performance of the top end of the market continues to surpass that of the UK housing sector as a whole.
February also saw prime platinum stock levels increase by 4.5 per cent compared to January and by 17.0 per cent year-on-year, taking them to just below pre-credit crunch levels.
Once again, London was among the top performers, with average prices standing at £1,082,896 in February, representing a 0.2 per cent rise on the previous month. The typical value of prime platinum property in the capital was £1,632,764, representing an annual increase of 7.8 per cent year-on-year and by 0.6 per cent on the previous month.
However, London was not the best-performing region for prime platinum property, that accolade went to the north-east. In this region, prices enjoyed monthly growth of 0.6 per cent and experienced an annual rise of five per cent. In fact, prices increased in five of the ten regions between January and February, according to Primelocation.com.
A shortage of properties at the top end of the market is driving up prices and demand, according to Nigel Elllis, director of estate agents Prickett & Ellis.
"The £600,000 upwards range and the houses £1 million and over are very much in demand, there's not enough to go around," he said.
"Our stock levels thankfully have gone up but at the end of last year with the snow and everything we had virtually sold everything, so although our stock levels have gone up I wouldn't say the markets is in any way flooded," he said.
"We still have a shortage or properties, there are more coming on but the market generally does have a bit of a shortage," he commented.
Now, in the run up to the general election, the prime property market is likely to experience a dip in activity, according to Mr Ellis.
"Elections are always quiet times and I think after the election we are going to see more of a financial squeeze with interest rates perhaps going up a bit," he advised.
"Things will change quite a lot after the election, which will bring in more properties. As interest rates go up and things get tougher, more properties will come on the market," Mr Ellis added.
"For this year, I would say we will have more properties to sell after the election, but I think it will be a harder market," he forecasted.
"Prices will go on rising while interest rates are low and then it will all settle back and become a more difficult market with more stuff coming on."
Knight Frank's research has also found that prices for prime central London property are on the up, rising by 20 per cent in the 12 months to the end of March 2010. They are now growing at their fastest rate since March 2008, according to the report.
"The central London market has enjoyed boom-like conditions in recent months, at least in terms of prices," commented Liam Bailey, head of residential research at Knight Frank.
It is not just the residential sector that is enjoying a buoyant period, prime commercial property in the UK is confounding expectations.
A recent report by Knight Frank suggested that offices in central London are set to record double-digit rental growth this year. City prime rents are expected to rise by 19 per cent in 2010 to £52.50 per square foot, up from £44 per square foot in 2009.
The reason for this rise is a shortage of high quality office space and revived tenant demand. Knight Frank also predicted that rents would rise to £67 per square foot by 2014, which would represent 52 per cent growth over five years.
According to the report, supply in the City fell by nine per cent in the second half of 2009 to 12.2 million square feet and a further fall of 12 per cent is forecast for this year.
In addition, capital values are expected to increase by 43 per cent this year, due to a combination of falling yields and rising rents.
These figures reflected earlier predictions by King Sturge, which suggested that prime central London commercial rents would increase by 10.5 per cent by the end of the year.
King Sturge's report forecasted that rents in the West End would rise by 7.6 per cent in 2010.
"UK real estate has become quite an attractive investment when compared to euro denominated assets," commented Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors.
"[In] the City of London market there has been a complete cut-off of development activity in the last couple of years and that is actually starting to manifest itself now in rental expectations, where the highest grade-A quality space hasn't been coming to market in the last couple of years," he added.
