Prime time

‘London House Prices Set to Crash! The Capital’s Property Boom Finally Ends! London Housing Bubble Pops!’ As the reality of the US sub-prime property story leaks across the Atlantic, headline writers are gearing themselves to tell the end of the ten-year fairy tale of almost uninterrupted growth in property values in the UK, and specifically the end of the skyrocketing cost of housing in London. But is that it? If you bought your ideal Kensington gaff in the last decade, are you going to spend the next few years regretting your decision, unable to cash in and stuck in a stagnant market? And if you were still thinking of buying, is now the time to look elsewhere?

Not necessarily. London’s stellar price growth levels may have topped out — few would argue that 20 to 50 per cent annual growth levels are sustainable — but endless quarters (or years) of falling prices aren’t necessarily the corollary of contagion from the US property blues. And for those looking for an interesting investment, London property may still offer value.

To begin with, let’s narrow the focus. For years the holy grail of UK property has been Prime Central London, defined by Savills as Mayfair, Belgravia, Knightsbridge, Chelsea, Notting Hill, Holland Park, Kensington, Hampstead, St John’s Wood and Regents Park. This summer Savills’ Prime Central London index noted an annual rise of 29 per cent. The so-called ‘ultra-prime’ residential property market — properties above the £5 million mark — rose an annual 48 per cent.

The story has been relatively simple. The UK’s economic strength has continued to grow. The Bank of England said recently that London would enhance its position as a global financial centre. Merger and acquisition deals were up 71 per cent from a year ago, which bodes well for the City bonuses.