A Happy 2012? Not bloody likely

The West is poised to fall into the euro abyss, threatening to pull even the once-mighty US in after it, and the time has come for estate agents to predict the future. Or, at least, voice their predictions for 2012.

Interestingly (or not) I find them with their heads firmly in the sand. They sagely discuss 2011 and suggest that 2012 will be more of the same. Predicting a lively market and rising prices would make them look very foolish indeed, so they use weasel words instead, but recession is not one of them. Neither is "stagnation" - why be downbeat when you can use "stability" and appear sensible and statesmanlike?

Yes, there are bits of Central London where most of the buyers are funny-money foreigners hiding behind off-shore companies registered in exotic if slightly fictional locations and prices resemble telephone numbers complete with dialling codes. But the truth is that, apart from those tiny islands, the seas are rough and the outlook turbulent.

A study by property website PrimeLocation has revealed the massive price gap between London’s most expensive homes and he rest. The asking prices of the top 10 per cent of homes, dubbed "platinum properties" by estate agents, are on average £53,934 higher than they were last September and stand at a staggering £1,729,894. The all-London average is £441,169. Across the UK the average is only
£219,943. Nigel Lewis, property analyst at PrimeLocation.com who commissioned the research, says: “The distribution of property wealth in the Capital is becoming increasingly uneven, as the prices of London’s most expensive properties continue to grow.

"London’s prime property market is far less sensitive to the issues facing the UK economy due to high levels of foreign investment.

"London is viewed by many investors as a safe opportunity, particularly those from overseas who also stand to benefit from a weaker pound.

"This is definitely a trend that looks set to continue".

In fact, overseas buyers spent an eye-watering £3.75 billion on top London properties last year. Research by business aviation manufacturer Hawker Beechcraft has concluded that Russians and former Soviet nationals top the league, having acquired an estimated 266 prime London properties worth around £429 million
On a regional level, Europeans (excluding UK nationals) accounted for 974 sales worth around £1.57 billion. This is followed by nationals from Asia Pacific who acquired 640 London homes, easily outpacing Middle East buyers who took 298 properties. Israelis are not counted...

Leading agents Savills have also found that London's best properties continued to show price growth in the third quarter of 2011, but noted it was at a slower rate than in the first half of the year. "Some 58 per cent of buyers were foreign nationals, with over one in five buying for investment", the company said. "Fewer than half of buyers, mostly British, were acquiring property for use as their main residence. Area dominated by domestic demand has generally shown lower levels of price growth". It was also noted that local families selling expensive homes tend to move within their existing area rather than moving out into the commuter belt.

And how about the rest of the London market?

"The asking price of the average London home has performed well this year, growing consecutively every month, but this is no match for London’s high-end market,” Nigel Lewis says.

Well, er, not quite. It is an abberation of the UK property market that prices are in terms of cash, without taking inflation into account. As inflation is currently running at an alarming 5% (giving the precarious state of the economy), any price rise lower than that will be notional. And even in London - outside the magical centre - prices are not rising at 5% a year - nothing like that.

As far as I can see, there is little room for optimism. The UK economy will do well not to shrink, unemployment is on the rise - especially among the young - and the average age of the first-time home buyer is 38 and also rising, as even the cheapest homes are out of their reach. Even at the top end, you would do well to remember that, having been on the market since 2007, there are around 20 flats available for sale at the Flagship of Bling, One Hyde Park.

Not to mention the events in Greece, Italy and beyond.

Happy 2012, everybody!