Prime central London residential property prices continued to increase in January, but homes in the City and City fringe areas also experienced growth, according to figures.
Homes in the heart of the capital went up in price by 0.9 per cent in January, Knight Frank’s figures show, while residential property in the City and City fringe went up by 0.8 per cent over the month.
The price of luxury properties in London has now gone up by 2.7 per cent in the last three months, the highest rise over a three-month period since July last year. Annual growth has hit 11.9 per cent, while property prices have increased by 42 per cent since March 2009.
Knight Frank head of residential research Liam Bailey said: “The strength of London’s luxury sector, against a backdrop of economic difficulties both domestically and globally, has surprised many over the past year.
“Ironically economic and even political turmoil have provided the impetus for growth – with a sharp growth in investors looking for a safe-haven location for at least part of their wealth portfolio.”
Properties priced in the £1m to £2.5m segment have experienced the sharpest price growth, according to Bailey, with homes in this price range going up by 14.4 per cent in value over the last year.
The rise in prices has been driven by a growth in demand, Bailey said. New applicants have gone up by 10 per cent, but the number of homes on the market has only increased by six per cent.
Bailey said: “The imbalance in supply and demand is most pronounced in the £5m-plus sector, where applicant registrations are higher by 65 per cent year-on-year.
“Over the past five years the ratio between the number of applicants registering to purchase properties in central London, and the stock of properties to buy has averaged 3.7. In the last three months, despite a weaker economic environment the ratio rose to hit 4.1.
“For the £5m market the ratio shifted from a historic position of 3.4 buyers per property to 6.4 – reflecting the historic under-supply at the upper end of the market.”
Knight Frank believes prices will go up by five per cent in 2012 as demand from international buyers continues to outstrip property supply.
Knight Frank’s head of the City and East team, Charlie Hart, said: “We expect the earning power of the traditional local demographic to grow with the continuing success of the London tech and creative industries which have traditionally populated this Fringe area.
“The scarcity of product will drive demand and therefore pricing for the foreseeable future, enabling the City and City Fringe to sustain prime central London pricing levels.”