London families moving to home counties

Upmarket estate agent Savills says the rampant price growth for homes in London has been slowing and that many families are selling up and moving into the home counties.

Savills' chief executive, Jeremy Helsby, said that rising numbers of people are cashing in on the recent house price boom and moving out of the capital into Surrey and Kent, and as far out as Cambridge and Oxford – as he himself has done. "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 £24.7m for the first half of the year. The estate agent lifted its half-year dividend by 7% to 3.75p a share. Savills, which is based in Mayfair, 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 £2.6m in pay and perks last year, also observed a shift within the capital, with more people moving from swanky 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.

Price growth for £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".

Savills forecast 3% price growth at the top end in London at the start of the year. 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. 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 £1m and £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.

Britain's commercial property market is booming, particularly shopping centres, along with the office market, 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 £100 per sq ft in London's West End, where the vacancy rate is just 3%, and breached £60 per sq ft in the City of London, while the Shard commands rents of more than £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 (£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 – despite very challenging markets.