The wide gap in cost between property in London, and homes elsewhere in the UK, is no secret. However, latest figures show that the difference is becoming even wider.
Apparently, property prices in London are now rising at an average of 7% a month, as people are trying to benefit from the housing boom.
Regardless of these statistics, industry experts are not expecting another housing bubble.1
Chief Economic Adviser to the economic analysts The EY ITEM Club, Peter Spencer, says: “The housing market is not experiencing a typical debt-fuelled recovery. Gross mortgage lending has increased but this has largely been financed by an increase in repayments by existing borrowers.
London House Prices Soaring
“New mortgage lending remains at rock bottom while Government initiatives such as the Help to Buy scheme will be having little impact on prices in London, where activity is fuelled by cash rather than mortgage borrowing.”1
Miles Shipside, Director of Rightmove.co.uk, who first reported on the increase in London’s property prices, comments: “Supply in much of the south is ridiculously tight, with for sale board black spots in many popular locations within easy commuting distance of London.
“There are vicious circles where there is so little property for sale that few local homeowners are willing to come to market to trade up, exacerbating the shortages and boosting sellers’ pricing power.”
Shipside also said that the introduction of stricter lending criteria might not reduce house prices, as hoped. This means that other costs, such as home and landlords insurance will stay high.
He continues: “Whilst a higher percentage of borderline mortgage applications will be weeding out, the overall numbers of those who are mortgage-worthy and wish to borrow and buy, combined with lenders who are flushed with funds, is still likely to result in increased buyer demand. It is encouraging that more homeowners are selling, increasing churn and supply and helping to moderate house price growth.
“However, because we should have built more in the past and are still not planning to build enough, prices will continue to rise in popular locations, further stretching affordability.”1
Landlords with rental properties in London should be prepared for many people to be priced out of the rental market, and should therefore invest in unoccupied property insurance, and rent guarantee insurance.