London realty can expect a post-Ramadan rush from Middle East investors

Across Greater London average residential values have risen by a staggering 834 per cent since 1982 with the most significant rises being in the prime postcodes of central London where growth has been in excess of 1,000 per cent. The population across the borough of Westminster has increased over a third although there has been an 85 per cent increase in those aged 35-50 years with an 11 per cent fall in the over 65s.

Compared with 30 years ago, London is a lot more appealing to the foreign buyer now and is now one of the most invested-in cities in the world. Around 25 per cent of the Middle Eastern clients we are now dealing with are the second-generation of our original clients from back in 1982.

The picture as we move into the second half of 2012 is a positive one. Any impact as a result of the recent changes to Stamp Duty Land Tax (SDLT) implemented by the Chancellor’s budget back in March appear to have abated.

These budgetary changes will affect 22 per cent of properties currently available for sale in our market. While still a sizeable chunk of the market, it is still considerably less than in nearby areas and will provide another boost to demand as buyers look to avoid additional costs elsewhere.

Therefore, we feel positive that the new 7 per cent Stamp Duty Land Tax will not affect what looks like being another buoyant year in our area, although it is probable that the sale of properties at just over the £2 million (Dh11.4 million) mark will become less common as buyers seek to avoid the additional tax rate.

At the same time, increases in stock levels are beginning to free up the market and ease the imbalance between supply and demand imbalance which has prevailed in recent years. The number of properties for sale rose by 15 per cent in 2011 compared to 2010 with further increases in the first quarter of 2012. That said, the number of transactions are down on the previous two years, which may largely be due to the perceived low quality of stock coming to the market.

However, despite transactional volumes being down, average sales prices achieved in our area have risen by 9.7 per cent over the past year. Meanwhile, in the past six months, the average price achieved on property sales has topped £1,000 per square foot. This is some 42 per cent higher than the average rate being achieved at the beginning of 2009 when the market was at its lowest in recent years.

The average price of properties currently available for sale is £1,430 for houses and £1,132 for flats in the London postcodes of W1 and W2. Assuming these properties achieve 95 per cent of asking price (as was the case in the past six months) it would mean a further increase in values of around 9 per cent for houses and 7 per cent for flats.

The London market is likely to quieten down during July and August as the Olympics and Paralympics take hold of the capital and divert would-be buyers’ attention. To most buyers the thought of 17,000 athletes and 20,000 journalists from 205 represented countries will be enough to make them delay their buying plans until after the event and that’s before you take into account the 63,000 people involved in staging the games and the 500,000 spectators all adding pressure on the transport network.

That said, if you can brave it, then this London summer in particular, will be an ideal time to embark on a property search given the fact that there will be substantially less competition in the market place which may enable you to pick up a property at a discount. By contrast September is likely to be a particularly busy month as wealthy Middle Eastern buyers return to the market in a post-Ramadan rush.

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