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The prime property market in London

According to Knight Frank, sales of new buildings in London have increased by 214% in the last quarter of 2009 compared to the same period in 2008. This increase is significantly higher than overall growth of 68% for the whole of London real estate market (ie, taking into account sales in the secondary market).

Elena Yurgeneva, Director of Business Development, Department of elite real estate Knight Frank, commented:

“The primary market is not characterized by an abundance of London put up for sale objects with a solid discount, and the lack of supply. Currently the volume offers a 20% lower than the 1 st quarter of 2009, the number of new homes available for buyers has reached historic lows , amounting to 975 objects in the 3 rd quarter 2009

Factors such as low interest rates on loans, the weakness of the pound sterling, which attracted foreign buyers, and the government’s efforts to support new construction and stimulate demand from the primary buyers, led to a strengthening of this market segment.

Although the process of recovery of prices in London’s new buildings are still lagging behind the growth in market prices of central London as a whole, in recent months, we saw an increase in the prices of some items, particularly in complex Embassy Court in the Seynt John’s Wood (central London). Nevertheless, in the understanding of developers, today is a good price dynamics - it is not their nominal growth, and reducing the size of discounts offered to customers.

One of the most noticeable changes in the primary real estate market of the British capital is the shift in demand from investment towards consumption. Earlier, the ratio of consumer demand for investment was 30:70 (buyers for himself / investors), but now it has changed to mirror 70:30 (buyers for himself / investors). This change is slowly beginning to influence the development projects because customers who choose to own housing accommodation, many demands on the planning of the premises and his other main characteristics. Knight Frank data on demand customers confirm that the requirements of the latter to gaining housing has increased significantly. In particular, the increased demand for housing larger area in central London. We believe that the most successful will be those projects that can create in their homes a unique atmosphere in which people would want to reside permanently.

Do not forget that investors are also not left the market - they account for one third of potential buyers. Once again sales were held at zero during the construction phase. And do not underestimate the ability of international investors. Buyers from Asia, particularly Hong Kong, Singapore and Malaysia have been extremely active over the past 12 months, but we can expect from them more. Using the available Internet resources, these investors are thoroughly suited to the choice of real estate, focusing on the most high-quality supply. This is good news for the market - means that developers in central London in the future even more will compete on the quality of projects, not just on price.

On the primary market of premium housing of the highest price segment recession was reflected in the last turn. Now that last year prices have risen more than 20%, developers are looking at this market with special interest. While sales fell sharply in 2008, with the second half of 2009, this segment began to come back to normal. The number of potential buyers of objects super-premium segment has not changed, the demand is at a good level. With the launch of projects such as One Hyde Park, Cornwall Terrace, The Lancaster’s and NEO Bankside, offer bonuses of new buildings will rise in 2010 and 2011. The specificity of this segment is that usually a property in such homes is part of a broad portfolio of properties of their respective owners.

In parallel with the sales of housing, the land market in London also made drastic changes. After the deep decline in 12 months the value of land in the middle of London grew by 9% in the second half of 2009, which resulted in competition for the site. However, to convince the landowners to sell plots was not an easy task, since the cost of land is still considerably lower than their peak performance. Supply reduction means that developers are forced to work with the existing proposal and make the best use of it. In particular, developers must think through the layout of future facilities to meet the requirements of today. We believe that the price of land in London continue to rise in 2010.

The worry is putting new proposals on the primary market of London. In east London accounts for 55% of new development projects - 72,212 apartments of a total of 131,414 apartments, but their construction has not begun. Although these figures sound impressive, the possibility of developers to realize the stated volume of construction limited to a lack of funding available for new projects. “