The London housing boom is spreading into the home counties, according to upmarket estate agent Savills, as families cash in on rising prices.
Savills' chief executive, Jeremy Helsby, said that rising numbers of people are capitalising on the ongoing boom and moving out of the capital into Surrey and Kent, and as far out as Cambridge and Oxford. "People are selling up in London - they've had a very strong rise over the last two to three years - especially families with kids who decide they can't get the right schools and want more space."
Contract exchanges outside London are up 20%, helping Savills post a 15% rise in pre-tax profits to pounds 24.7m for the first half of the year. Savills conducted twice as many sales outside the capital than within, although in revenue terms its business is still skewed towards London where values remain much higher.
Helsby, who received pounds 2.6m in pay and perks last year, also observed a shift within the capital, with more people moving from wealthy west London to the east, which has been revitalised by the Olympic park. Savills hopes to open another office in east London. Transport links across London are set to improve with the opening of Crossrail in 2018.
Despite warning last year that too many housing projects in London are aimed at wealthy buyers, Savills said the luxury mark in the capital is slowing. It said price growth for pounds 5m-plus homes in central London has been slowing over the last 18 months, while the rest of the country is still recording strong "recovery growth".
So far prices for luxury homes are up just 2.5% and are expected to remain flat for the rest of the year, Helsby said, lower than forecasts at the start of the year of 3% growth. The remainder of the UK is on track for 4.5% growth. With the ultra-luxury property market slowing, the firm is focusing on what Helsby called a "mid-market brand," selling homes worth between pounds 1m and pounds 2m in areas such as East Sheen, Victoria and Battersea in south-west London.
Lenders Nationwide and Halifax say house prices across Britain are still growing fast, at an annual rate of around 10%, although there are signs of a slowdown.
The Bank of England has identified a housing shortage as one of the principle causes of the housemarket boom and Savills warned in February that construction is failing to keep pace with demand. Savills said the number of new houses is forecast to increase to 167,000 a year by 2018, up from the 108,000 completed last year. However, 240,000 new houses are needed every year to meet demand in the UK, compared with a peak of more than 200,000 in 1968.
Elsewhere in the UK, the commercial property market is booming, led by shopping centres and offices, Helsby said. London has become so expensive that international investors are turning increasingly to cities such as Manchester and Bristol. Office rents have reached over pounds 100 per sq ft in London'sWest End, where the vacancy rate is just 3%, and breached pounds 60 per sq ft in the City of London, while the Shard commands more than pounds 80 per sq ft.
Helsby was also bullish on the outlook for commercial property in continental Europe, particularly Ireland, Spain and Germany, followed by the Netherlands and Poland. Even Hong Kong's "yo-yo market" is looking better, where Savills has just sealed a HK$1.6bn (pounds 140m) deal.
The Savills results beat expectations, and Numis Securities analyst Chris Millington upgraded his estimates for both 2014 and 2015 by 5%, reflecting higher US profits and a stronger than expected performance in Asia.
Meanwhile, a survey published this morning showed that 90,000 properties were sold across England and Wales in July - a 21% increase on a year earlier and the highest monthly total since November 2007, according to estate agency group LSL Property Services and research firm Acadata. However, the report stated that outside of London, the south-east and east Midlands, prices dropped and stabilised across the rest of England and Wales.
More and more people are profiting on the boom and are moving out of London to Surrey, Kent and Oxford (above)
Photograph: Jeremy Moeran/Alamy