Central London house prices: now even millionaires are being priced out

Yesterday super-upmarket estate agent Savills said the capital's luxury housing market 'cooled' in the first quarter, while demand for big-money homes outside the centre has risen.

by Emma Haslett
Last Updated: 03 Jun 2014

All this ‘bubble’ talk about central London seems to have had an effect on house buyers: for the first time in ages, prices in Prime Central London – that’s everywhere from Mayfair to Bloomsbury to Chelsea and Notting Hill – have begun to cool, according to posh estate agent Savills, which published its first quarter results yesterday.

Apparently prices flattened out at the end of the market most of us can only dream about: £10m plus. That coincided with a rise in demand for homes between £1m and £2m (well-appointed bedsits, then) in the north, east and south west of London. (It’s worth pointing out that anything above £2m incurs the sort of stamp duty that makes Roman Abramovich shudder).

According to a Savills spokesperson, Prime Central London is still showing about 9% year-on-year growth, about 2% in the first quarter of the year. This slowdown wasn’t unexpected: ‘This is in the tiny sliver at the top of the market where values are about 50% above peak [ie. pre-recession]. They’ve had a bit of a storm and they need to pause for breath. It’s completely expected, and if anything a bit overdue.’

Indeed: Savills’ most recent forecast shows house price growth will slow from 8.5% this year to 6% in 2015, 4% in 2016 and 2% the following year. Which is at least a bit of good news for savers desperately trying to make their deposits catch up with inflation in prices.

?That said, Savills and its rival, Knight Frank, have been predicting a slowdown in the sector for several months now, and we have yet to see anything particularly noteworthy. Critics of the Help to Buy scheme say the government should scrap it to cool down demand.

Admittedly, with its £600,000 cap, Help to Buy isn’t even close to applying to the capital’s most expensive homes. But, as with everything, a rise in prices at the top end of the market will eventually filter down. And although slowing demand in £10m+ properties suggests the number of job-creators (ie. super rich entrepreneurs and business people) is slowing, it’s sales of one-bed new-builds in Forest Hill and Norbiton that will keep the recovery ticking over.

So ludicrous prices like the £140m some poor sod paid for a flat in One Hyde Park affect the entire market. But that’s supply and demand, innit? Build more homes, and property prices will look after themselves.

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