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Housing market may be near peak

The rising momentum of  house prices in London slowed  after a robust performance in the past 12 months. The market is forecast to quieten later this summer, but prices will continue to rise  next year because so many of the world's rich want a home in a city where there are too few to go round.

According to Rightmove.co.uk, average asking prices grew only 0.7 per cent and the annual growth rate dropped from 24.8 per cent to 23.1 per cent.

'More than half of London's boroughs saw house prices falling during June. Seventeen out of  32 to be precise. We can expect a drop in house price over the next few months,' said Miles Shipside, Rightmove's commercial director.

Liam Bailey, the head of residential research at Knight Frank, said: 'Our data reveals some indications that the market may well be close to its peak in London.

'A slight shift in demand and supply appears to be beginning which, if it continues, will begin to see a move away from a sellers to a buyers market. We believe that price growth will begin to become more subdued by late summer.'

Mr Bailey forecast that prices would rise 20 per cent over the course of this year.

According to the latest Knight Frank Prime Central London Residential Index, prices for the British capital's most des-res homes rose 33.3 per cent in the  12 months to  May. This is the biggest rate of growth since March 1979 and means central London prices are rising three times faster than Britain's mainstream property values, the consultancy says.

Once again 'uber-prime' Belgravia and Knightsbridge led the market,  with property owners in those areas  seeing 45 per cent price rises over the past 12 months, Knight Frank's figures reveal. A house in these districts worth GBP100,000 (HK$1.5 million) in 1976 would now be worth more than  GBP4.2 million.

Prices for several properties have broken the GBP4,000 per square foot barrier, the consultancy reveals.

'In the six months to May,  monthly price growth averaged 2.8 per cent, compared to only 1.9 per cent in the same period to May 2006,' Mr Bailey said.

Developers are struggling to find sites to build homes in central London. The latest surge in prices has reinforced prime central London's position as the most expensive place in the world to buy a home. Average prices for luxury homes are GBP2,300 per square foot, Knight Frank reports.

Jim Ward, a director at Savills Research, said there would be double-digit growth  next year, provided no unforeseen shocks to the global economy occurred.

Figures from Savills show 48 per cent of properties valued at  GBP1 million or more are being bought by  foreigners and 40 per cent by London's bonus-spending finance workers.

'We expect continuing global economic growth, including fast growth in developing economies, to continue to create high net-worth individuals looking for relatively safe liquid investment markets with scarcity of supply,' Mr Ward said. 'London residential fits the bill with the bonus of having become a preferred address for the global super rich.

'Also, we expect London's emergence as the world's premier financial centre to underpin continuing City bonuses over the longer term.'

According to Chesterton Global, Russians dominate demand for homes valued at  GBP5 million or more.

London's luxury property values were growing faster than average British prices, because they were less affected by interest rate rises, Robert Bartlett, chief executive  of Chesterton Global said.

Many buyers of luxury homes do not need a mortgage. 'Top-end London property is insulated from the rest of the market and shows little sign of slowing,' Mr Bartlett said.



Price growth in London slows after robust pace