Opinion

London Enjoyed 'Respectable' Growth In 2012

London emerged as the star of the 2012 residential property market, achieving pleasing growth throughout the year. Liam Bailey, global head of Knight Frank Residential Research, explained that the capital had unsurprisingly differentiated itself from the rest of the UK.

"As always the average position across the UK has disguised the performance of different submarkets, and none has been more different than the central London market, which saw nine per cent growth in prices in 2012," he said. This has added to recent growth, taking prices in central London an average of 34 per cent higher than 2009. Conversely, across the rest of the UK prices have only increased by one per cent over the same period.

"International demand has helped to propel London prices higher and has also influenced the prime outer London property markets, covering Wandsworth to Richmond, and Hampstead and Canary Wharf - where prices managed to rise by five per cent in 2012 and a respectable 13 per cent over the past three years," Mr Bailey continued.

However, the sustainability of such growth is questionable, with the turbulent nature of the UK property market as a whole possibly threatening the capital's performance and tax changes damaging demand for prime London property. Knight Frank has predicted that in this segment there will be no price movement, which could impact upon the Capital's overall transaction totals.

This will be threatened further by the possibility of a triple-dip recession in the country. According to Grainne Gilmore, head of UK Residential Research, it is these "unusual economic conditions, rather than a genuine equilibrium in the market" that is causing stagnation.

Tighter mortgage lending rules are also putting pressure on the sector, with transaction levels roughly halving since the market peak in 2007. Ms Gilmore explained that mortgage levels are still 35 per cent below the 20 year average. "First-time buyers and those further up the housing ladder struggle with tighter mortgage lending rules," she added.

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