Another month...another record broken in the Central London housing market

• Latest figures from the Knight Frank Prime Central London Residential Index reveal that prices of the best properties in central London have risen by over 33.3% in the 12 months to the end of May 2007 • This is the fastest rate of growth since March 1979 and means that prices in central London are now rising at more than three times the rate seen in the wider UK market • Once again it has been properties in the “uber-prime” market of Belgravia and Knightsbridge which have led the rise in the market – rising by more than 45% in 12 months • A house worth £100,000 in 1976 would now be worth over £4,200,000 • Exceptional London properties are now hitting the £3,000 per sq ft barrier – and several properties have broken the £4,000 per sq ft barrier

Liam Bailey, Head of Residential Research, comments:

Once again we find another month passes and the rate of London price growth increases yet again. Coming on the back of more than 18 months of very strong price appreciation, the pace of growth has actually quickened over time. In the six months to May 2007 monthly price growth averaged 2.8%, compared to only 1.9% in the same period to May 2006.

Prices in central London are now over 33.3% higher than they were a year ago, and in some locations growth is over 45% (Knightsbridge and Belgravia). Houses have again outpaced flats in terms of price performance, reflecting the structural deficit of family accommodation, a national problem which affects London more than any other UK region.

Value growth in London has taken prices to such a level that only Monaco in world rankings is able to really complete with London on a like for like basis. Prime prices in central London stand at £2,300 per sq ft, in Monaco they are close to £2,190 per sq ft and in the next most expensive locations – such as New York, Hong Kong and Tokyo are only £1,600, £1,230 and £1,100 per sq ft respectively.

Our data reveals some indications that the market may well be close to its peak in London. A slight shift in demand and supply appears to be beginning which if it continues will begin to see a move away from a sellers to a buyers market. We believe that price growth will begin to become more subdued by late summer.

In 2004 and 2005 the average ratio of new applicants registering for top end property (demand) vs. the supply of new property registrations (supply) hit a ten year low. Between late 2005 and February this year the ratio doubled as an increasing number of buyers were matched with diminishing supply of properties. Since March however there has been a noticeable slowdown, with new applicants registering for properties down by 30% compared to recent months.

This is a lead indicator which we think shows we are moving into a slower market - pricing has some way to run and we still think that central London prices for property priced over £3M will grow by 20% in 2007.

Prime Central London Residential Sales Index, results

Month | 12 month change | 6 month change | 3 month change | monthly change Jun-06 | 17.8% | 12.9% | 6.4% | 2.0% Jul-06 | 20.5% | 14.0% | 7.0% | 2.5% Aug-06 | 21.2% | 12.7% | 5.6% | 1.0% Sep-06 | 23.5% | 12.6% | 5.8% | 2.2% Oct-06 | 24.8% | 12.7% | 5.4% | 2.1% Nov-06 | 26.6% | 13.2% | 7.2% | 2.7% Dec-06 | 28.6% | 13.9% | 7.7% | 2.6% Jan-07 | 30.5% | 14.5% | 8.6% | 3.0% Feb-07 | 31.1% | 16.3% | 8.4% | 2.6% Mar-07 | 32.0% | 17.3% | 8.9% | 3.1% Apr-07 | 33.0% | 18.0% | 8.6% | 2.7% May-07 | 33.3% | 17.8% | 8.6% | 2.5% Source: Knight Frank Residential Research

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Notes to editors

About Liam Bailey Liam Bailey is the head of Residential Research at Knight Frank. Residential Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, financial and corporate institutions. Our research reports are available at www.knightfrank.com/research

About the Knight Frank Prime Central London Residential index Knight Frank has selected properties from the top end of the market in Central London. These consist of flats and penthouses with an average value of £2.5m and houses with an average value of close to £5m. These properties are located in postcodes W1, SW1, SW3 NW1, SW10, W8 and W14. These properties are revalued monthly to provide the timeliest and most accurate assessment of pricing trends in the prime central London sales market.

About Knight Frank Knight Frank and its New York-based partner, Newmark Knight Frank, operate over 140 offices in established and emerging property markets on five continents. Last year, the companies handled transactions valued at over $41 billion with annual revenues of over $545 million. For more information about Knight Frank, please visit www.knightfrank.com

Press enquires

Liam Bailey is available for comment on +44 (0) 20 7173 4966 liam.bailey@knightfrank.com

Davina Macdonald Lockhart, Residential Press Manager Tel 020 7861 1033 Email: davina.macdonald.lockhart@knightfrank.com