London prices will grow by between 5% and 7% in 2014 as the capital remains a magnet for foreign buyers, despite the planned tax charge on overseas investors.
But this marks a slowdown from growth of 10.3% in the last 12 months, and shows the market is stabilising, according to estate agent Marsh & Parsons.
Chief executive Peter Rollings said: “London’s housing market saw a substantial uplift in 2013, and we expect a similarly strong start in 2014 to drive an annual rise in prices – but these won’t be as spectacular as last year.
"With ongoing support from government initiatives, the rate of growth will remain sustainable."
Rollings expects to see "modest increases" in mortgage rates next year, as unemployment falls and lenders anticipate the first base rate hike.
"But with a general election coming up in 2015, any changes are unlikely to create shockwaves through the housing market.”
The combination of high demand and lack of supply will continue to drive price increases in the prime London property market.
There are currently 18 registered buyers per available property, compared to 13.5 at the end of 2012.
This ratio will remain high in 2014, Rollings said: “Many sellers will remain cautious of putting their property on the market as they are not confident they will be able to find somewhere to move to, therefore supply is unlikely to improve considerably next year.
"As a result, property will continue to sell for close to or at the asking price and we may see our average success rate of 98% of the sale price currently being achieved in prime London increase even further."
The new CGT charge on foreign property owners won't have a dramatic effect next year, Rollings added: “With the change only being introduced in April 2015, we may find a short-term rush for tax-free sales before the policy comes into effect, helping to boost supply and fluidity at the highest level.
"However, even with yet more tinkering from the Chancellor, London remains a more attractive and easier place to buy property than many other cities around the world.
"Providing politicians don’t kill the golden goose, demand for the best properties will remain fierce.”
He predicted another strong year for the London rental market. "As competition heats up, void periods will continue to fall, and 2014 tenants will face intense competition for the best properties.”
Comments