Fewer rich foreign buyers are seeking to invest in safe haven properties in London with the latest analysis showing a rise in British buyers for prime real estate in the centre of the city.

UK buyers have accounted for 53% of the market since the start of the year, up from 36% last year and 27% in 2012, according to the research from international property firm Knight Frank.

The combined figure for UK and European buyers is 79% this year compared to 46% in 2013, a notable increase that the firm says underlines how sustainable demand remains for super prime property.

The report also shows that average annual price growth across prime central London in the year to April slowed to 7.5%, but the figure is noticeably lower in the higher price brackets. Annual growth for £10 million plus properties was 3.3% and this moderation in the rate of growth comes as buyers increasingly seek value beyond the popular postcodes’ of Mayfair, Knightsbridge and Belgravia and vendors become more realistic on pricing.

The firm’s analysis of the super prime property prices shows that they grew strongly in the immediate fallout of the financial crisis and to some extent the rest of prime central London is now catching up, helping to explain the divergence in performance between the £10 million plus market and the rest of the prime London market.

British buyers are increasingly stepping into the place of foreign buyers as threats like the collapse of the euro zone diminish at a time when the UK economy improving. It means that there are now more British buyers in the super prime bracket than at any time since the collapse of Lehman Brothers.

Transaction levels have jumped markedly. There was a 54% increase in the number of £10 million plus deals done in the 12 months to the end of April compared to the previous year.

However, the report also says that while economic conditions are more benign, the political backdrop has become more unpredictable. In the UK, a series of tax changes for residential property have been announced. While individual changes will not generally deter buyers at the super-prime level, they lead to a mood of uncertainty and rising political rhetoric that is likely to dampen price growth in the run up to the UK general election in May 2015.

At the same time, instability in emerging markets, triggered by events such as the conflict in Ukraine or China’s economic slowdown, could spark a second wave of ‘safe haven’ capital into the super-prime London market and put upwards pressure on prices.

What buyers of all nationalities have in common is less loyalty to the golden postcodes of Mayfair, Knightsbridge and Belgravia. In 2013, 51% of super prime deals were in one of those three districts compared to 26% so far in 2014.
Areas such as Marylebone and Hyde Park are becoming firmly established on London’s super prime map as buyers seek more square feet for their money and developers…