Prime Property Prices in Central London Up 116% in Last 8 Years

Research shows that in the past 8 years prime Central London house prices have more than doubled and it is up by 116% outpacing the RPI by 86%, according to this recent article on September 11th, 2013 of the Property Wire.

Prime central London house prices have more than doubled in the past eight years, up by 116 and outpacing the Retail Price Index by 86%, new research shows.


By contrast the average UK property price is 19.3% down on the same period, according to the research from Savills which tracks the expansion of the market since its indices were launched in 1979 and analyses in detail the performance of different locations in the latest market cycle.

It shows that prime central London property prices have grown on average 4.9% per annum since 1979.  This compares to just 3.6% above inflation across greater London and a UK average of 2.9%, opening the gap between prime London and the rest to its widest ever.

Mayfair tops the growth chart with growth of 139% since the middle of 2005, followed by Knightsbridge, Belgravia and Chelsea with growth of at least 128%.  All are now at least 30% above peak.

The analysis points out that supply has failed to keep pace with demand, resulting in an expansion of prime London from its Belgravia core in the 1950s to a swathe that runs from Richmond in the south west to Islington in the north, from Chiswick in the west to Canary Wharf in the east.

‘London is seen as one of the premier world cities in which to both live and invest. London’s economy has been put at nearly a third the size of that of the whole of the UK. Like other global cities, London attracts capital from around the world,’ said Yolande Barnes, head of world residential research.

She pointed out that the demand catchment for London housing is therefore global and the appetite for investment remains strong. Also London is physically limited in size and by very low levels of new supply so real house prices have risen much faster  than elsewhere.

‘London is a honey pot for wealthy real estate buyers but many of these buyers also live and work in London. It would seem that London’s housing market is inextricably tied with its economic success but it has been failing for some time to increase supply at a sufficient rate to curb price growth,’ explained Barnes.

This means that the lack of housing supply is playing out most visibly in London’s prime housing markets where the wealthiest home owners can compete most effectively for space.

Looking forward, the analysis suggests that the strength of outer London prime markets will be dictated by the creation of new wealth from the London economy and the flows of wealth between prime markets.

The report says that generally, over the next five years, London and the south east are expected to lead the economic recovery in the UK. In London, the economic growth from the all important financial and insurance sector is likely to be on a par with the average for the capital. The highest economic growth is forecast from the professional scientific and technical and information and communication sectors.

‘These sectors will, like financial services before them, also attract international investment and human capital which is expected to be reflected in overseas demand for housing. This is likely to widen the profile of buyers and support underlying housing demand for prime property beyond central London,’ it points out.

It also suggests that an increased proportion of prime demand is likely to be focused on the commuter zone given the gap between pricing in these markets and prime domestic London.

‘We expect to see a continued displacement of wealth from the prime central London markets into other parts of prime London and beyond. The markets in closest proximity to prime central London will see continued overseas buying activity, mainly from full time residents in the capital. This means the prime central London and other prime markets will remain linked,’ adds the report.

Article Source: http://www.propertywire.com/news/europe/london-prime-property-analysis-201309118224.html

UK House Prices leap to Record High

This latest property investment news posted by Matt Clinch, Assistant Producer of CNBC talks about the high price increase of houses in the UK.

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London

The price of houses in the U.K. hit a record high in July, according to online real estate portal Rightmove, which doubled its forecast for 2013 prices and now expects them to rise by 4 percent, up from a previous estimate of 2 percent.

The average property asking price is now at £253,658 ($383,171), Rightmove said on Monday, up 0.3 percent since June and 4.8 percent higher than at the same time last year. In cash value prices have risen £11,561 in a year.

This marks a seventh consecutive monthly rise in the price of property coming to market, and the second successive national record, it said. Prices in the capital still show the biggest increase with London prices gaining 12 percent since July 2012.

"The market is currently benefiting from the 'aggregation of marginal gains' where incremental improvements across a range of key market drivers compound to slowly but surely build momentum," Miles Shipside, Rightmove's director and housing market analyst said in a press release.

"London will continue to outperform the rest of the country and we also expect the South East, the main beneficiary of the 'over-spill' from the capital, to maintain its strong momentum, both driven by an on-going shortage of supply of property for sale. Asking prices in the capital are currently 29 percent higher than they were five years ago compared with 7 percent in the South East and just 5 percent nationally".

The firm's forward-looking confidence survey - which collates 25,000 responses from home-movers - now shows that 62 percent expect property prices to be higher a year from now, double the 31 percent recorded a year ago.

The report adds to a slew of positive data for the U.K. housing market. The Council of Mortgage Lenders said on Thursday that there were 42 percent more first-time buyers in May than a year ago. The Royal Institution of Chartered Surveyors' also indicated a price spike last week. Seasonally adjusted house price balance jumped to 21 in June from 5 in May, it said, the best reading since January 2010 and the biggest improvement in a single month since 2009.

In a new report released on Monday, leading economic forecasting group Ernst and Young's ITEM Club predicted that Britain's economy will be supported by an improvement in consumer sentiment and the housing market, but the sudden surge in prices is sure to fuel the debate that government intervention is fueling a dangerous bubble-like rise in the market. 

The Bank of England's current quantitative easing (QE) program has run alongside a Funding for Lending Scheme, providing state-backed assistance for first-time buyers. Additionally, U.K. Chancellor of the Exchequer George Osborne announced in his latest budget a £5.4 billion "Help to Buy" mortgage scheme aimed at helping citizens with a limited deposit to purchase property.

Critics of the latter measure have included both The International Monetary Fund and former Bank of England Governor Mervyn King who called it "too close for comfort" to the U.S. mortgage guarantee schemes that some blame for triggering the financial crisis.

Peter Spencer, professor of economics and finance at the University of York and advisor at Ernst & Young said that the housing figures on a national basis were getting better, but did not believe in a widespread bubble.

"Outside London, where there is a bit of a bubble , housing is pretty moribund actually," he told CNBC Monday.

—By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

Article Source: http://www.cnbc.com/id/100885610

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