Investors allocating their money to London’s prime real estate, might well be having a very merry Christmas after all, as prime central London prices ended the year 7.5 per cent higher than in 2012.

Investors allocating their money to London’s
prime real estate, might well be having a very merry Christmas after all, as
prime central London
prices ended the year 7.5 per cent higher than at the end of 2012, according to
research by the global real estate firm, Knight Frank.

The asset class proved to be an extremely good investment,
with an 0.8 per cent rise in December. In comparison, gold fell by a quarter
from January to mid-December, the firm said.

“Reviewing the year-end position reveals investors would
certainly have had more cause for celebration if they’d bought prime central London property rather
than the safe-haven asset of gold at the start of 2013. By the middle of
December, gold prices had fallen by about a quarter since the start of 2013 as
investors ventured back to the stock market and the US Federal Reserve began
dropping hints it may wind down its economic stimulus programme,” said Tom
Bill, associate at Knight Frank Residential Lettings.

However, growth in prime London real estate was far from even across
the city. While there was double-digit growth in some areas, the market was
more subdued in the core markets from Mayfair
to Chelsea, Bill added.

Prices in Chelsea rose 2.7
per cent while growth was 5.8 per cent in Mayfair and 6.7 per cent in
Knightsbridge, meaning all three areas ended the year by under-performing the
wider prime central London
average for the first time in ten years.

This compares to double digit price growth in areas like
City & Fringe (15.7 per cent), Islington (11.8 per cent) and Marylebone
(12.3 per cent), revealing a growing division between prime central London’s traditional heartland and the rest of the prime London market.

Rents continue to drop

Conversely, prime rents in central London fell 0.4 per cent in December,
amounting to a 2.3 per cent drop year-to-date, compared to 2012’s 3.2 per cent
decline.

This is the lowest annual decline since September 2012 and
most likely comes down to increased demand from bankers as the financial
services industry, slowly moves into hiring mode.

“While 2011 and 2012 were marked by deep job cuts, many
banks began to hire again last year, partly in response to greater regulation. The
result was increased activity among bankers in the rental market and one
encouraging sign was that corporate relocation agents were a more common sight
than 12 months ago,” Bill added.