Home Values in Prime Central London Reach High of £1.70 Million

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Average prime Central London home values reached a record high of £1.70 million by year-end, after increasing by 12.60 percent in 2013, according to consulting firm Cluttons. 

The total increase in values this year is almost twice the 6.40 percent growth rate in 2012. In the final quarter, Central London capital values grew from 2.80 percent to 3.00 percent. 

A report from Knight Frank yesterday showed prime Central London home prices ended the year 7.5 percent higher than 2012, while highlighting a "clear" division among the city's areas.  

Last month,  report from Savills showed the city needed build about 50,000 new homes each year, approximately double its current rate, to satisfy the city's growing housing demand.

Even with increased accessibility to debt finance, many "reluctant renters" remain unable to obtain homeownership. However, rental demand has not increased.  

Net rental demand in Central London fell by 1.5 percent in the fourth quarter, after a weak 0.30 percent increase the previous quarter, Cluttons reports.  

An improving economic climate and poor pension prospects are driving buy-to-lease investors to increase the stock of rental property, further depressing rental values.

"The gradual return of bonuses has helped to fuel an upturn in the number of buy to let properties on the market in recent months, which is suppressing rental value growth rates, by boosting supply against a backdrop of weak demand," James Hyman, partner, residential sales at Cluttons UK, said in the report. "The improving economic climate is driving a wave of housing upgrades across London; however properties are not being recycled as owners are turning their former homes into rented properties, decreasing sales stock available and increasing pressure on values."