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October 8, 2010
Confusing Property Market Signals
For the third consecutive month house prices in the UK have fallen according to intelligence group Hometrack. The decrease in price comes as public interest weakens, with estate agents reporting a 2.9% decrease in the number of people registering with them during September, and an ever increasing number of new homes coming onto the market rising steadily at a rate of 1.2%. These figures mean that over the last three months demand from potential buyers has dropped 6.5% while the number of new homes entering the UK market has increased by 7.2%.
To many these figures look frightening and the outlook for the UK doesn’t look good but we must remember that national figures don’t fairly represent individual areas such as the prime and Ultra prime central London market where according to CB Richard Ellis the prime central market unlike the rest of the UK has had a strong six months with a pickup in transaction levels and significant average house price increases of 23 per cent and 20 per cent in Westminster and Kensington and Chelsea respectively.
The drop in National interest is undoubtedly being fuelled by a lack of public confidence in the economy (no signs things are getting better) and the recent announcement that banks are tightening their lending restrictions. Whereas, and the reason for, prime London properties increasing in value is because interest in these properties from international investors has increased with Savills stating the average house prices for central London prime properties have increased due to the continued activity of overseas buyers enjoying an exchange rate advantage, and domestic buyers, including those in the financial sector preventing unsold stock levels rising as they did in the wake of the credit crisis.
It is this continued transactional activity that has supported prices and separated the prime markets of London from both the mainstream, which has seen further price falls in the quarter, and the prime markets outside of the capital where transaction levels have fallen and a clear buyers’ market is emerging.
As this article shows National figures don’t provide accurate information on individual areas within the country thus must be viewed with caution. As by looking closer at individual figures such as the ones provided for the prime and ultra prime central London market we see a different picture altogether one that is not reflected in the National forecasts.