House Prices Rises in South-West London Beat Capital's Centre for First Time

This article by Anna White of The Telegraph on September 26th, 2013 shows that for the first time escalating house prices in south-west London have outpaced property values in the capital's centre.

“Prime” property (the top five to 10pc of the housing market by price) in the affluent south-west London belt, which stretches from Fulham to Wimbledon, increased by a record 11.8pc over the past year.

Prices in central London continued to show steady year-on-year growth of 5.6pc but were overshadowed by a burgeoning "domestic market" with the city's south west, north (7.4pc) and east (6.5pc) all experiencing an uptick, according to new research from Savills.

The real estate adviser’s report quashes criticism of the Conservative’s Help to Buy scheme, the second stage of which starts in January.

At this week’s Labour Party Conference, shadow chancellor Ed Balls warned the programme, in which the Government guarantees 95pc mortgages on all properties worth up to £600,000, could push up prices forcing young buyers out of the market.

However, the residential property recovery is being driven by equity rich Londoners and foreign investors, as opposed to Help to Buy expectations.

Lucian Cook, head of research at Savills, said: “In the south-west belt there is still a store of wealth from bonuses earned before the credit crunch and money made recently by hedge fund managers. Europeans are also moving into the areas like Fulham, in which prices have jumped 114pc over the past eight years.”

The analysis shows that £22 out of every £100 of equity in the UK housing market over the past year was spent in London. Therefore the total £146bn of equity applied to buying in the UK, £33bn was spent in London.

Mr Cook said: “This is a cash-driven phenomenon and completely unrelated to Help to Buy. It provides no evidence of a credit-fuelled boom in the wider market.”

The hike in house prices in south-west London is also due to a reluctance to move further out into commuter zones such as Guildford.

“This is a psychologically big move and often ties in with finding a new school. Following the recession people are not exploiting the pay gap between south-west London and the Surrey corridor. Mindful of job security, they’re staying put and therefore allocating more wealth towards housing,” he said.

There is a new build development pipeline around Canary Wharf, and continued appetite for warehouse conversions in Wapping. Gentrification of fashionable areas such as Shoreditch and Dulston is also driving up London prices.

“But talk of a housing boom is premature. Transaction levels are still very low at around 60pc - it is still not a fully functioning market,” Mr Cook concluded.

Despite this, at the top end, the cost of mansions in the capital's centre in the £10m plus bracket has increased by 38pc since 2007. The most expensive properties purchased in London over the past year include a Regent’s Park house for £80m and a luxury pad on Avenue Road, St John’s Wood, sold for close to £25m. While a house in Richmond went for £12m.

Article Source:  http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10334345/House-prices-rises-in-south-west-London-beat-capitals-centre-for-first-time.html

London Fuels Record Growth in UK House Prices

English property prices pushed roaring demand for London housing more than their peak at the height of the country's economic boom according to this article by Ed Hammond, Kate Allen and Claire Jones of FT Adviser on September 17th, 2013.

Roaring demand for London housing has pushed English property prices beyond their peak at the height of the country’s economic boom, official figures showed on Tuesday, underscoring concerns of an impending housing bubble. 

House prices in the capital outpaced those in the rest of the country by a factor of 10 times during the past year, according to figures from the Office for National Statistics. The jump helped lift the English average house price 3.7 per cent during the 12 months to July to £255,000, surpassing the 2008 zenith.

 

The Bank of England’s Financial Policy Committee, which is responsible for safeguarding financial stability, is on Wednesday expected to discuss the housing market against the backdrop of warnings from policy makers that the government’s mortgage guarantee schemes are fuelling nationwide price growt.

Last week, the Royal Institution of Chartered Surveyors urged the BoE to curb the risk of another housing boom by taking the unprecedented measure of capping national house price growth to 5 per cent a year.

After stripping out the impact of London, however, average UK house prices rose just 0.8 per cent during the year, underlining the diverging economic fortunes between the capital and the wider UK housing market.

This divergence complicates the BoE’s new policy of “forward guidance” under which the FPC must confirm that ultra-low interest rates are not serving to undermine financial stability.

While it would be unlikely for the FPC to signal the end of forward guidance a little over a month after its introduction, the new policy heaps pressure on the FPC to explain why housing is not compromising financial stability.

To date policy makers have focused on a one-size fits all solution for the country.

“The difficulty is you have significant variations between London and the rest of the UK, so it is impossible to control pricing by manipulating the entire mortgage market,” said Lucian Cook, head of UK residential research at Savills, the property group. “All it will achieve is to create further polarisation between the equity-rich buyers and the debt-reliant market”.

The cost of an average London home hit £318,000 in the 12 months to July, according to the Nationwide, compared with £167,200 for the rest of the UK. The difference means the average London house is worth 1.9 times property elsewhere, eclipsing the 1987 peak of 1.75 times.

Analysts do not expect the FPC to announce measures to restrict activity in the mortgage market in its post-meeting statement next Wednesday. Mark Carney, governor of the BoE, last week played down concerns a housing bubble is inflating, while saying policy makers needed to remain “vigilant”.

“When looked at in the broadest terms, it is obvious that no agent of the government would wish to act at the current time to cool the housing recovery,” said Brian Hillard, economist at Société Générale. “What the Bank can do, however, is monitor the state of the housing recovery.”

Prices also rose in Northern Ireland, where the property market has been devastated in recent years. Average house prices fell in both Scotland and Wales, however.

The ONS index only includes transactions involving a mortgage – it does not include cash-only purchases. A substantial proportion of sales are now to cash buyers.

The LSL/Acadametrics index, which includes sales to cash buyers, showed a 3.2 per cent annual rate of growth in its most recent figures. But other indices run by mortgage lenders, such as Nationwide and Halifax, show prices are still substantially below their 2008 peak. House price indices have diverged in recent years, as methodological differences produce increasingly divergent results.

Article Source: http://www.ft.com/intl/cms/s/0/0d15ebae-1f8f-11e3-8861-00144feab7de.html#axzz2fPX03wcg

UK is Urged to Invest £50bn in a Greener Economic Recovery

For the sake of UK greener economic recovery, Green New Deal campaign group says £50bn should be spent on technology, cheap housing and insulating homes as revealed on this article by Heather Stewart of TheGurdian on September 8th, 2013.

Campaigners have warned that Britain is hurtling towards a new economic crisis, and call for a £50bn "Green New Deal" to create more sustainable growth and better-paid jobs and equip the country for a low-carbon future.

After two quarters of better-than-expected GDP growth and a batch of positive economic indicators – including rising house prices and upbeat business surveys – the coalition is hoping the summer economic bounce will turn into a longer-term recovery. But five years on from their first demands for a radical reworking of Britain's business model, the Green New Deal group, which includes Green party MP Caroline Lucas, economist Ann Pettifor and tax expert Richard Murphy, says the need for an alternative approach is greater than ever. In a report published on Monday, and seen by the Observer, it argues that recent growth has been based on unsustainable rises in consumer spending and house prices and could end in "the mother of all credit busts".

"Recovery is an interesting word to apply to an economy that is marked by rapidly rising personal debt, highly insecure and often low-paid work, and rising underlying carbon emissions. What we're calling a recovery is poor, divided, indebted and polluting," said Andrew Simms, chief analyst at thinktank Global Witness and an author of the report.

Central banks have poured cheap money into financial markets to drive down interest rates and prevent deflation and depression. But Green New Deal says this is a dangerous gamble: "Given the choice, they prefer to have the problem of asset prices going through the roof than the problem of deflation. If they are wrong and the bubble bursts before the recovery arrives, it will be the mother of all credit busts," it says.

Under an alternative plan in the Green New Deal report, the government would invest £50bn into expanding green technologies over five years, building low-cost housing, and employing a "carbon army" to insulate hundreds of thousands of homes and reduce energy use.

The authors say these measures would create more, and better-paid, jobs than the current debt-fuelled bounce, which Pettifor described as an "Alice in Wongaland" recovery. Lucas, who is the MP for Brighton Pavilion, said a grassroots workforce could be trained to lag Britain's chilly lofts "within weeks". "Ministers want to cut a nice big ribbon on a new nuclear power station – but this would be far more effective in getting our emissions down quickly," she said.

Real incomes have continued to fall over the past year, as above-target inflation has outpaced pay growth, in what the TUC has described as the greatest wage squeeze since the 1870s. Green New Deal argues that if more workers were paid a living wage it would help to create more sustainable consumer demand. Frances O'Grady, the general secretary of the TUC, which begins its annual congress in Bournemouth on Sunday, supported the Green New Deal initiative, saying: "The green economy already employs nearly a million people, in areas from electric-car manufacturing to wind-turbine installation. Implementing some of the ideas in this report could help these industries create more of the skilled and well-paid jobs we need if we are to build a sustainable recovery."

The authors suggest their pro-growth policies could be paid for by scrapping the controversial HS2 rail project; cracking down on tax evasion; and launching a fresh round of quantitative easing.

Instead of using electronically created money to buy government bonds from City investors, as the Bank of England has done with almost all of the £375bn-worth of QE it has undertaken since 2009, the proceeds this time would be used to invest in green projects, and pay off private finance initiative debts, freeing up public money to be spent elsewhere.

The report argues that investing in affordable housing, in particular, would benefit those on lower incomes more than the better off. "It can mean that people have more disposable income after housing costs, which in turn boosts spending in the local and national economy," the report says.

The authors argue that a rapid boost in the supply of housing would also help to "dampen the housing bubble beginning to appear in response to government measures such as Help to Buy, which facilitates prospective homebuyers to find a deposit". The controversial Help to Buy scheme was the centrepiece of George Osborne's March budget, and has been questioned by a number of critics, from the former governor of the Bank of England, Lord King, to the International Monetary Fund, amid fears that it could create a new property boom.

Mark Carney, the Bank's new governor, has said he is "very alert personally" to the risk that a housing boom is emerging – and said he was ready to burst any bubble, by targeting mortgage lending.

Reforming the bailed-out banking system is another central proposal of the report, suggesting that Royal Bank of Scotland, which is majority-owned by the taxpayer, could be broken up into a series of regional lenders that would build relationships with local industries. "All the mechanisms which have been brought into play to encourage lending to the productive part of the economy don't seem to be working," says Simms.

Labour has promised to introduce a British Investment Bank, to boost lending to businesses; but it has eschewed much of the Green New Deal agenda over the past five years, focusing on an emergency VAT cut as the centrepiece of its policies to create a recovery.

Other members of Green New Deal include Charles Secrett, former director of Friends of the Earth; Jeremy Leggett, chairman of green energy firm Solarcentury; and Larry Elliott, economics editor of the Guardian.

Article Source: http://www.theguardian.com/environment/2013/sep/08/invest-greener-recovery