Quarterly comment
Naomi Heaton, Chief Executive of LCP, comments:
Land Registry figures are the most reliable data source available, providing a complete market view in a non-qualitative manner. It is, perhaps, somewhat surprising that against, a background of plummeting transactions (down almost 50% against Q1 2007), prices in London Central have shown considerable growth, with an average increase of 8% from January to March this year.
The "lag" between offers being agreed on a property, through to completion of the purchase and the registration of the sale with the Land Registry means that there may be more telling information to come, but it would also stand to reason that higher-end purchases will be less influenced by the current squeeze than those at the entry level.
From LCP's constant exposure on the ground, it is clear that the panic buying of early 2007 has gone. However, realistically priced and attractive properties will still command a premium, whilst those that are fundamentally flawed will have to trade at a discount to their true value if the vendor is looking to move quickly.
What does this mean for current investors, or for those looking to come in to the market?
For those with existing exposure, rents have continued to harden in London Central, although at a slower rate than last year. This is due to conflicting forces within the rental market.
There are numerous people stepping back from the sales market (as evidenced by the drop in transactions), postponing investment purchases whilst they wait to see how the market unfolds and at the same time reducing rental stock. On the other hand, there are the inevitable job losses in the City which reduces demand.
This is when it pays to have the right investment property in your portfolio - top end property has seen demand fall as tenants tighten their belts in these uncertain times, but pressure on the core investment properties (1 and 2 bedroom flats) will be driven up at the same time.
For those looking to enter the market, there are genuine value opportunities available, especially if funds are readily available and the overall purchase proposition is attractive. Undoubtedly there will be numerous investors who will profit from the current turmoil.
And looking to the future? Whilst growth will be limited for now, the long term prognosis remains strong and we anticipate a return to long term trends.
Click on either the London Central Investor Track to find out more
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