It may take a lot for Knight Frank to admit it (it may not) but the firm is now saying that the belly may be starting to fall out of the lucrative luxury property market in London, despite the fact the prices continue to rise – for the moment anyway.
The latest release of the firm's Prime Central London Index increased a slight 0.3 percent in May from the previous month. It also showed prices up 3.2 percent from the start of the year and 7.2 percent from a year earlier.
But according to the report, there is "growing evidence that buyers are less willing to commit to homes with over-ambitious price tags".
A boost in sales in the fourth quarter was largely evident in the relatively budget-oriented under-£2 million segment, which posted a 28 percent rise in sales.
"The strength of the sub-£2 million sector provides one indication that buyers are becoming more price sensitive," said Liam Bailey, global head of Knight Frank residential research. "There is a discernible shift in the market, with anecdotal feedback confirming that buyers are willing to agree to purchases, but only when prices are realistic."
There were actually "modest price" falls in Belgravia and Knightsbridge in May, despite strong demand, Knight Frank reported.
However, the firm pointed out that the ultimate top segment of the market is still doing well. The report showed that prices in London's priciest neighbourhoods are 58 percent higher than the market low in March 2009, with a 17 percent jump in sales in the first four months of the year compared to a year earlier, and the number of new applicants up 40%.
Foreign buyers continue to drive sales, with a "widening of demand" from different countries. For example, Knight Frank has seen a 23 percent increase in searches from Turkey compared to a year ago, and Turkey's overall market share has risen from 0.6 percent of all prime central sales to 1 percent.
- Thursday 06 June 2013