In the first half of 2011 the Midtown, City and Docklands residential markets saw a return to price growth in the sales market, but in the rental market there were nuances in performance by location and unit size, with evidence of flat or falling rents as well as rental growth. The performance of the sales market was far better than was expected at the end of 2010.

In the sales market, confidence was boosted by the outstanding performance of the New Homes market, where units were sold off-plan and during construction to both overseas and UK-based buyers at premium prices. This price performance trickled down to the re-sale market, where prices also increased. Overall, across Midtown, City and Docklands, residential prices increased by 6.5%. In nominal terms, the increase in the first half of 2011 took prices in both Midtown and the City above the levels achieved at the previous market peak in September 2007. Docklands prices also grew, but at
June 2011 were still 7% adrift of peak levels.

The rental market was more subdued in the first half of 2011. Many tenants extended their leases at the end of tenancies, while some others managed to make the switch to owner-occupation as first-time- buyers. As a result, transaction levels were lower than in 2009 and 2010 and the supply and demand balance shifted. Although there was evidence of rising rents for one-bedroom flats at a rate of 5% over the six months, for two-bedroom units there was no growth.

expensive units, which rent for in excess of £600 per week, exhibited a reduction in rent levels of between 5% and 10% in the Midtown and Docklands sub-markets, but increased marginally by 2% in the City. Looking ahead to the second half of 2011, the risks for price changes in the Midtown, City and Docklands sales market remain on the upside. In our view prices will continue to rise across all three markets but at around half the rate seen in the first half, at 2% to 3%. The selling season in the second half of the year is more curtailed than in the first half in any case. On the other hand, for the rental market, we expect to see an improvement in rent levels in the order of 5%. In part this will be driven by the continued difficulty in obtaining mortgage finance, forcing buyers to remain “Generation Renters”, but mainly due to increased demand from rental accommodation in the busiest months of the year, from August through to October.