Top-notch property market takes off

Quality residential property in prime areas of London has regained almost all the value it lost during the recession and is back to 1989 levels. Estate agents report some family houses, particularly freeholds, up 20 per cent, in the past year.

Kensington and Chelsea are the hot spots for large, freehold family homes. Buyers are scrabbling in roads such as Drayton Gardens, Chelsea. Knight Frank & Rutley has just sold one house for its asking price of pounds 1.5m, and demand for another on the street was described as terrific.

Estate agents believe that the top end of the market has been buoyed up by a relatively small number of people, often on large City salaries and bonuses, who have done well out of the stock market's relatively strong recent performance. Wealthy overseas buyers have also had an impact.

A Gothic villa, designed by Quinlan Terry, the architect, address simply The Gothic Villa, Regent's Park, was exchanged and sale completed in two days, to an unnamed overseas buyer. The asking price: a mere pounds 6.5m.

Knight Frank & Rutley's Prime Central London Price Index shows an average increase in prices of almost 10 per cent in the 12 months up to this month. Values are only just under 3 per cent down on the peak levels seen in 1989.

However there are anomolies in the 1993-4 figures and many properties in Mayfair and Belgravia have fallen in value.

Lorna Vestey, of Knight Frank & Rutley, said: 'Over that 12-month period, most of the gain was in the latter part of 1993. The first six months of this year have seen a levelling off, particularly during the months of April to June, though demand in many categories is still good.

Of the Mayfair anomaly, she said: 'Many properties in Mayfair are held on leases which are not long enough to appeal to the South-east Asian investors who have made up a very significant percentage of flat purchasers in central London over this period.

Two and three-bedroom flats in good buildings with long leases - 90 or 100 years-plus - are selling as soon as agents get their hands on them. Areas from Hammersmith up to Hampstead were all holding their own.

Buyers from South-east Asia will not tolerate shabby common parts to a shared building. Good parking is a must and is limited. In Kensington and Chelsea there are more than 31,000 permits for 23,000 spaces. In Westminster there are more than 31,000 permits for 23,000 spaces.

Overall, agents say they are quietly welcoming the recovery, but call for a degree of caution. 'Some properties you cannot get enough of, while others are sitting there unwanted. It is not good to have the market blowing hot and cold, said Ms Vestey.

It is also true that where the top of the market goes, the rest does not necessarily follow. Foreign buyers and big city wage packets have had a huge impact, but this does not always trickle down.

The best country cottages, Property, pages 14-15

(Photograph and graph omitted)