The strength of the prime London housing market in the first-half of 2011 led to some significant increases in asking prices on new properties. Both agents and vendors looked to capitalise on a rising market and relative scarcity of stock, and as a result many asking prices were somewhat optimistic.

Whilst the best properties are still achieving significant premiums, the more tentative approach by potential purchasers over the past couple of months meant vendors of those properties yet to find buyers are reassessing their asking prices. The market has become much more price sensitive, and getting the asking price right from the outset can directly influence the level of interest and final sale price achieved.

Some of the best sale prices over the summer period have been achieved on properties with competitive asking prices. They have helped to generate early interest from prospective buyers, which has resulted in situations where a number of purchasers have been in competition for the property, often bidding over and above asking price to secure it. Recent analysis of all agents' stock in the prime London areas — Regent's Park, Hyde Park, Marylebone and Bayswater — has shown that price reductions are now becoming an increasingly common occurrence.

Lowest reductions

Properties being marketed at under £1 million (Dh5.8 million) have seen the lowest level of price reductions (26 per cent of current stock) and have achieved on average 97 per cent of asking price. This is perhaps unsurprising, due to the more constrained budgets at this level of the market, meaning that more accurate pricing had been set from initial marketing.

The highest proportion of available properties with price reductions was higher value homes of over £2 million. In fact, 51 per cent of properties within the areas above this price threshold, and 41 per cent across the rest of prime London have been reduced in price since they were first marketed.

With the market for properties over £2 million having been particularly active over recent months, especially with overseas buyers, the number of price reductions does point towards overly ambitious initial valuations within this sector, rather than a lack of buyers.

The average selling prices are now within three per cent of asking price, with over 29 per cent sold in the last three months achieving in excess of asking price. As we move into the autumn market, accurate pricing from the outset will be vital in generating early interest to achieve attractive sales prices.

The supply-demand imbalance in prime London areas continues to support growth. Larger properties continue to command a premium, the most pronounced being within the Regents Park area where properties over 2,000 square feet are selling for, on average, £996 more per square foot than properties under 1,000 square feet.

The top end remains active with 41 per cent of sales in the third quarter being in excess of £1 million and 17 per cent over £2 million. This is a significant increase over the same period in 2010 when only 5 per cent of sales were above £2 million.

Middle Eastern buyers

Overseas buyers continue to dominate the upper end of the market. Middle Eastern buyers remain the most active within this sector of the market for the third quarter running.

While Knightsbridge, Kensington and Belgravia have traditionally been the first ports of call for wealthy overseas buyers, an increasing proportion of our applicants are non-UK nationals attracted by the variety of stock, access to central London and the cosmopolitan feel of the areas we cover. Many also recognise the value for money here compared with some of the prime streets south of Hyde Park.

Within London's prime boroughs, levels of transactions are closer to peak than averages in both wider London and England and Wales. Factors limiting the mainstream housing market are not holding back prices or levels of activity within the prime markets of London, supporting the increasing disconnection between the prime and mainstream housing markets.

With both political and economic instability in the Eurozone and beyond, many are looking to the London property market as an increasingly important asset class within their global portfolio.

 

The writer is the chairman of Kay & Co., a London based estate agency.