Knight Frank Residential Research reports that London property prices have increased by 12.9% since the start of the year, with the last monthly price fall now over a year and a half ago. However, there are signs of a slowdown in activity, with exchanges in the second quarter down 7% compared with the first quarter of 2006.
The prime London rental market has also seen continual growth and further rent increases have resulted from supply shortages relative to higher demand following rising fortunes in the City. Although rental yields have fallen due to the high performance of the sales market in the first half of the year, the lettings market is now strengthening.
Foreign investors and occupiers have returned to the market, with the rise in prices helping to maintain confidence amongst overseas buyers. Middle Eastern buyers in particular are reported to be active, helped by increasing oil prices.
