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FREEHOLD values in prime central London rose again in 2010 for the fourth quarter in a row and, according to the latest authoritative indices, are now just 10% below their September 2007 peak. Whether or not values continue to rise in 2010 is difficult to call because much of the "recovery" has been due to restricted supply of good quality stock and the weakness of sterling. The supply of rental properties in prime central London has fallen contemporaneously resulting in potentially higher yields which should further strengthen appeal to the overseas investor. Therefore even in this uncertain economic and political climate it is hard to see freeholds in prime central London market falling in value over the next 12 months.

THE most recent indices of prime central London property values have shown a rise of just under 13% over the last three quarters. This "recovery" appears to be a result of both the low supply of good quality stock and the return of the overseas investor emboldened by the weakness of sterling. Whatever the cause, the effect is simple, the recent savings in premiums due to the large fall in freehold values between September 2007 and March 2009 are diminishing.

It is worth reiterating the simple fact that, all things being equal, the shorter the lease the more expensive the premium. Lessees are deciding to serve their s42 notices now to prevent their leases declining further.

WE have been inundated with instructions from lessees wishing to take advantage of the huge fall in freehold values.

The prevailing sentiment that the bottom is not far away and central London property is beginning to look affordable again is coinciding with the widespread realisation that a long lease is essential in order to maximise marketability.