01.06.09  Financial Times, 1 June 2010

London house prices

By Daniel Thomas, Property Correspondent

Demand from Russian buyers has helped push the prices of prime central London house close to peak levels even as those of less expensive homes in the UK appear to be weakening. Prices in central London rose by 1.4 per cent in May, the 14th consecutive monthly rise, according to Knight Frank, the upmarket estate agency. Houses are being traded for prices only 6.4 per cent below the March 2008 market peak, boosted by the rise in numbers of overseas buyers, in particular a surge of 112 per cent in Russian applicants in the past two months.

Elena Norton, head of Knight Frank�s Russian desk, said: "Buyers from Russia and the CIS states have increased interest in London's luxury market on the back of recent events in the eurozone, which has prompted the strengthening of the rouble against the pound."

Gary Hersham, managing director of Mayfair-based Beauchamp Estates, said sterling's weakness and worries over the political and economic stability of Russia had help prompt the influx of Russian buyers.

Noel de Keyzer, head of house sales in Sloane Street for Savills, added that more than half of sales of more than �20m this year went to Russian buyers, "whereas last year there were practically none".

Knight Frank warned that the upheaval in global financial markets had begun to unsettle some buyers and sellers; proposed changes to the UK's capital gains tax regime had also worried the market, it said. Liam Bailey, head of residential research at Knight Frank, said: "There has been a sharp uplift in prospective vendors looking to test the market, with a growth of 64 per cent in requests for pre-sale advice and valuations." He pointed to evidence that residential sales volumes and prices were coming under pressure in the wider market given the combined threats of a sharp capital gains tax rise and the abolition of home information packs.

Rightmove said the number of new listings went up by 35 per cent in the seven days after HIPs were suspended. Hamptons saw new instructions rise by a third in April, in spite of an expected slowdown in the market before the election. The stock of houses on the market had risen in recent weeks and more are anticipated as second homeowners try to sell early to avoid the potential CGT increase.