Dynamics of UK’s property market still led by transactions in London

Compared with the third quarter price peak in 2007 in prime central London property, Far East buyers are benefitting from discounts of as much as 60 per cent and those from the Middle East as much as 30 per cent due to the lower sterling. As no immediate appreciation in the value is predicted, the gains look set to continue.

Domestic and international cash buyers are still apparent. At the lower end of the market, demand is also being aided by a wider availability of mortgage finance for first-time buyers with numbers more than doubling compared with the same period in 2011 and particularly evident in the higher loan to value ratio brackets.

The combination of factors looks set to maintain demand in the prime central London market and override the 0.5 per cent reduction in GDP expected this year. Forecasters predict annual growth of 3.2 per cent, despite the impact of the Olympics.

The Central London rental market did not experience the Olympic boost from tenants and a complete halt on corporate relocations during the games period only made things worse. However, recent evidence of a rise in recruitment in June and July suggests a flurry of activity in the autumn.

Despite this a rental growth drop of 1 per cent forecast between now and the end of the year, largely in response to the unsustainable rental growth seen in 2011. Forecasters predict a growth of 2 per cent in 2013 and subsequent increases in 2014 and 2015 of 3.5 to 4 per cent.

In 2001 the ratio between average house price and salary was 7.4, but by 2011 that had risen further to 11.1. Ultimately this will push an even greater number of people into the private rented sector for the long term.

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