The average value of prime properties in central London will buck the national trend and increase next year, according to an estate agent’s report.
Properties in areas such as Mayfair, Kensington and Knightsbridge will go up in value by an average of five per cent in 2012, before remaining relatively unchanged the following year and then rising once again in 2014, Knight Frank found.
The estate agent’s report said: “The London market has benefited from a weak pound and growth in global wealth portfolios, demand for international education opportunities and demand for ‘safe haven’ assets on the back of recent geopolitical concerns.”
However, home values in London as a whole will drop by 3.7 per cent next year, although this is the smallest decline forecast anywhere in the UK, where property prices are forecast to fall by five per cent on average. Rising unemployment, low wage growth and government job cuts have been cited as the reasons for the predicted fall in property values across the country in 2012.
Knight Frank head of research Liam Bailey said: “Prices in prime central London are currently at an all time high, despite which we believe there is scope for further price gains over the next 12 months, averaging five per cent across 2012. The reasons which have underpinned recent growth, a weak pound, renewed wealth creation in emerging markets, the search for safe-haven assets and flight capital – all seem set to continue at least in the short term, reinforcing our positive view for next year.”
A nationwide drop in house prices next year would be the first fall since 2008 and growth is not expected to return to the market until 2014, when values are predicted to increase by one per cent, the London-based broker’s report said. The North East, Scotland and Wales are forecast to be hardest hit.
Knight Frank head of UK residential research Grainne Gilmore said: “After falling by 15 per cent in 2008, it was widely forecast that the market would dip again the following year, but this failed to happen – largely because of the drop in interest rates. We believe that this correction is still to come, but that it has been pushed further and further out because of low base rates.
“But next year, amid a “perfect storm” of a struggling economy, public sector cuts and rising unemployment, prices will fall. As interest rates start to rise, prices will struggle to maintain any notable growth until 2015.”